SIAS calls for land banking to be regulated

The Securities Investors Association (Singapore), or SIAS, has called for strict regulation of land banking investments.

This came after investors filed complaints against British land banking firm Profitable Plots.

They claimed that the firm’s directors were not transparent with their investments.

However, experts said that a regulatory framework for land banking investments would be difficult to enforce.

Profitable Plots is currently under investigation by the Commercial Affairs Department for failing to meet payments to investors.

But investors’ repeated queries to the firm’s directors fell on deaf ears.

Investors received “standard” replies from the firm, such as being unable to answer their queries due to ongoing investigations.

To protect small-time investors, SIAS has recommended regulating land banking investments.

David Gerald, president of Securities investors Association (Singapore), said: “It is an alternative investment, but many investors are depending on higher returns.

“And foreigners, it seems, can just set up a business like this and take money from Singaporeans and others around the region who have great confidence in the Singapore brand name and the fact that we are well regulated and laws are enforced strictly.”

More than 200 complaints were filed against Profitable Plots for amounts totalling more than S$23 million.

SIAS has urged the firm’s directors to hold a dialogue session with investors.

Mr Gerald said some of the investors used their life savings to invest in various Profitable Plots schemes, such as buying interest in land plots in the UK and investing in lubricant businesses.

“We are making this public call – we know what the standard is, and because there are investigations going on, there will not be any possibility of their clients meeting us. … Many of (their) investors are suffering and they are in pain, so they can meet with them and allay their fears,” added Mr Gerald.

Lawyers said buying an interest in an undeveloped land in a foreign country is currently unregulated… just like buying an overseas property.

Mr Chia Kim Huat, a partner at law firm Rajah & Tann, said: “If it is structured as a sale of land interest, then in a sense it is no different from the sale of foreign properties in Singapore.

“These days there are foreign developers selling bungalows and apartments in Singapore. All these are sale of interest in foreign properties, so land banking could be seen as a sale of interest in foreign undeveloped land as well.”

He added: “We also have to bear in mind that in a lot of these cases, the properties are located in foreign jurisdictions, so if the authorities are to regulate the sale of such foreign properties, one has to decide how the regulations can be enforced overseas, because a lot of this activity takes place out of Singapore.

“So there’s probably not much practical value if you have a set of regulations here, but you can’t enforce it overseas.”

Profitable Plots claim that land banking investments can generate returns of up to 12.5 per cent a year.

But both SIAS and law firms remind investors to practice due diligence before investing in any kind of high-risk and high-return assets.

Source : Channel NewsAsia – 25 May 2011

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