On 1 April 2026, the unanimous judgment in Kession Capital Ltd (in Liquidation) v KVB Consultants Ltd and others [2026] UKSC 11 by the Supreme Court clarified the scope of a principal firm’s liability for the actions of its appointed representative (AR).
The appeal rested on section 39 of the Financial Services and Markets Act 2000 (FSMA) – in particular, whether the FCA authorised principal firm, Kession, was responsible for the activities of its AR, Jacob Hopkins McKenzie Ltd (JHM) which dealt with retail clients. This was put in question as Kession’s Part 4A permission excluded it from dealing with retail clients and had put in place an AR agreement (ARA) with JHM to expressly exclude such activity.
Statutory provision
Section 39 of FSMA provides for an authorised firm to permit another person (namely, its AR) to carry on regulated activities with the AR benefitting from an exemption from the general prohibition in section 19 of FSMA. However, the principal assumes responsibility for the AR’s activities “to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility.”
The judgment emphasised the three distinct parts of section 39(1) of FSMA:
- there must be a contract permitting or requiring the AR to carry on business of a prescribed description;
- the authorised firm must accept responsibility in writing for the whole or a ‘part’ of that business; and
- if the above two limbs are satisfied, the AR is exempt from the general prohibition only in relation to the precise business or part of it for which the authorised person has accepted responsibility.
Issue on appeal
It was held that dealing with retail clients (in this case, by JHM) formed a ‘part’ of the business of a prescribed description. In other words, it related to the scope of the business and not the way in which it was carried on. As the ARA had expressly excluded retail clients from its permitted scope, Kession had not accepted responsibility for that part of the business. As a result, Kession was not liable under section 39(3) of FSMA for JHM’s dealings with retail clients.
Final thoughts
The judgment is significant for principal firms as it highlights that a principal firm’s responsibility is tied to an AR’s business which the principal has both permitted and accepted responsibility for in writing. The court warned against imposing “the broadest possible liability” on principal firms and “promiscuously broad exemption” for ARs, both of which would go against the intentions of FSMA.
For appointed representatives, the decision is a reminder that acting outside the scope of the ARA may result in a loss of the section 39 exemption. This likely leaves the AR in breach of the general prohibition in section 19 of FSMA which has potentially serious criminal consequences. Finally, an AR should not seek to rely on a principal’s authorisation to shield from scrutiny in relation to an activity that the principal is not permitted to undertake.
Key Contacts
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2026.