We looked into whether Katherine of Alexandra Ltd established and operated an investment scheme without FCA authorisation. Discover what we found and what it might mean for investors.
Katherine of Alexandria Ltd was set up to produce, market and distribute the film ‘Fall of an Empire: Katherine of Alexandria’, which was released in the UK in April 2015. In return for funds paid to Katherine of Alexandria Ltd to fund the film’s post-production, marketing, promotion and to secure distribution, investors would receive a proportionate percentage of royalties from the film on its showings after release.
We looked into Katherine of Alexandria Ltd to see if it was breaching our rules.
Our view
We believe the investments offered by Katherine of Alexandria Ltd in the film are likely to constitute a collective investment scheme (CIS). Typically a CIS is a hands-off ‘armchair investment’ fund, managed on behalf of investors. Anyone who wishes to establish or to operate a CIS must be authorised by the FCA to do so.
Katherine of Alexandria Ltd is not authorised by the FCA so was in breach of the provisions of section 19 of the Financial Services and Markets Act 2000 (FSMA).
We have given very careful and measured consideration to the options available to us. Although we believe that Katherine of Alexandria Ltd established and operated a CIS without FCA authorisation, we do not believe it would be in the investors’ best interests for us to pursue legal or enforcement action at the current time to close down either the company or the film investment scheme.
What this means for investors
We want investors to have all of the available options; it is up to them whether they act on them.
If you invested in this scheme, you:
- may therefore be entitled under section 26 of FSMA to recover any money or other property paid or transferred by you under the agreement with Katherine of Alexandria Ltd, and compensation for any loss sustained as a result of having parted with it.
- may be able to unwind your contract with Katherine of Alexandria Ltd.
- may wish to seek independent legal advice about your position under FSMA.
Investors should also be aware that if they deal with a firm that is not authorised by us, they will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong or if they have a complaint against the firm.
If you are concerned about your investments in the film, you can report your concerns to us via the Customer Contact Centre[1].
Legal background
Section 19 of FSMA, also known as the general prohibition, states that a person may not carry on a regulated activity in the UK unless they are authorised by the FCA or exempt. Regulated activities include establishing, operating or winding up a CIS. Under section 23 of FSMA, it is a criminal offence to act in breach of the general prohibition.
A breach of section 19 of FSMA by an unauthorised firm gives rise to consumers’ statutory rights under section 26 of FSMA. Under section 26, an agreement made by a person in the course of carrying on regulated activity in contravention of the general prohibition is unenforceable against another party.