“Anything done or omitted”: Supreme Court judgment on the scope of a principal’s liability for its appointed representative

The Supreme Court has recently allowed an appeal relating to the extent of a firm's responsibility under FSMA for the activities of its appointed representative (AR).

The judgment (Kession Capital Ltd (in liquidation) v KVB Consultants Ltd [2026] UKSC 11) considered the starting point of the principal firm's acceptance of responsibility in writing for the activities of its AR. A principal has a statutory responsibility under FSMA for anything done or omitted by the AR in carrying on the relevant business (to the same extent as if the principal had expressly permitted it). 

This allows ARs to carry on certain regulated activities under the regulatory oversight of the principal firm. The FCA effectively relies on the principal firm to carry out this oversight given it does not directly regulate the AR itself. The scope of the principal's responsibility and the terms of the AR agreement can come under scrutiny if the AR goes on to cause harm to clients.

The issue

In the case at hand Kession Capital Ltd (“Kession”) had agreed to appoint Jacob Hopkins McKenzie Ltd (“JHM”) as its AR. The AR agreement expressly prohibited JHM from dealing with retail clients. However, investment schemes set up by JHM failed and affected retail investors (with no prospect of recovering from JHM) brought a claim against Kession.

Kession resisted the claim on the basis that, in dealing with retail clients, JHM had acted outside the scope of the permission given to it by Kession, and therefore correspondingly outside the scope of the business for which Kession had assumed responsibility.

The eventual appeal to the Supreme Court considered whether, by restricting JHM’s permission to dealing only with professional clients (in line with Kession's own permissions), Kession only accepted responsibility for JHM’s dealings with professional clients (and not with retail clients).

The decision

The court ruled that Kession was not responsible under FSMA for anything done or omitted by JHM in carrying on business with retail clients. Dealing with retail clients was seen as a "part" of the business of a prescribed description within the meaning of the relevant FSMA provision, i.e. it went to the actual scope of the business for which Kession had accepted responsibility rather than merely the way in which it was carried out.

The reasoning included:

• The undermining of effective regulation if an authorised person lacking expertise in dealing with retail clients were nonetheless required to monitor and supervise and accept responsibility for its AR's dealings with retail clients.
• The potential freedom of an AR (if the other view were accepted) to choose to deal with retail clients even where prohibited from doing so by the terms of its appointment without civil or criminal penalty (i.e. in the context of the AR's exemption from the general prohibition).  
• The inconsistency in requiring an authorised person to be responsible for its AR's dealings with retail clients if it is accepted that a principal may form the view that its AR is qualified to deal with professional client but not with retail clients. 

Implications 

Even though on the present facts the principal's responsibility was ultimately curtailed, the case emphasises the importance of a carefully drafted AR agreement given the gravity of the principal's responsibility under FSMA and its potential exposure.    

The case may also be seen in the context of the proposed reforms to the AR regime, with HM Treasury's consultation considered in our recent blog post here. 

"... there would seem to be an element of regulatory overkill, and indeed unfairness, in making an authorised person responsible for an appointed person’s activities in dealing with retail clients when it is expressly prohibited from doing so by the terms of its appointment".

https://supremecourt.uk/uploads/uksc_2024_0114_judgment_b06648d630.pdf