Kession Capital v KVB Consultants: Supreme Court rules on appointed representative liability under FSMA

The Supreme Court has allowed the appeal in Kession Capital Ltd (in Liquidation) v KVB Consultants Ltd and others [2026] UKSC 11, ruling that an authorised person bears no responsibility under section 39(3) of the Financial Services and Markets Act 2000 for an appointed representative's dealings with retail clients where the appointed representative agreement expressly prohibits such dealings.

Lord Richards, delivering the unanimous judgement, held that dealing with retail clients constitutes a distinct "part" of a financial services business within the meaning of section 39 — and that where an authorised person has not accepted responsibility for that part, it cannot be liable for it.

Kession Capital held a Part 4A permission that excluded retail clients. In June 2015, it appointed Jacob Hopkins McKenzie Ltd ("JHM") as its appointed representative under an agreement ("the ARA") that likewise prohibited JHM from conducting any business with retail clients. JHM promoted a series of property investment schemes, all of which failed. Investors — who claimed they had been misclassified as professional clients — suffered combined losses of approximately £1.7 million. They brought proceedings against Kession on the basis that it was responsible under section 39(3) for JHM's conduct.

Summary judgement was granted against Kession at first instance and upheld by a majority of the Court of Appeal, which held that client classification was a matter of how regulated business is conducted rather than what business is conducted — and therefore could not define the scope of an authorised person's responsibility.

Lord Richards rejected that analysis. The critical question was whether dealing with retail clients, as opposed to professional clients, constitutes a "part" of the business of a prescribed description within section 39(1). He concluded that it does, for three principal reasons.

First, the distinction between retail and professional clients is fundamental to the regulatory architecture of FSMA, attracting significantly different conduct obligations, training requirements and supervisory duties. An authorised person whose expertise and permission are confined to professional business is not positioned to monitor or supervise an appointed representative's dealings with retail clients, which SUP 12.4.2R expressly requires it to do.

Second, permitting the scope of responsibility to extend to prohibited client categories would produce an authorised person being responsible for activities it is not itself permitted to conduct — an outcome difficult to reconcile with the explanatory notes to the Financial Services and Markets Bill, which stated that the authorised principal "must therefore have permission for all the activities" covered by the appointment.

Third, construing "part of that business" to exclude client categorisation would have the perverse effect that an appointed representative acting in breach of a prohibition on retail client dealing would enjoy exemption from the general prohibition — removing, rather than enhancing, consumer protection.

The decision resolves a tension left open by Anderson v Sense Network Ltd [2019] EWCA Civ 1395. It confirms that the "what/how" distinction does not exhaust the analysis under section 39; the ordinary language of "part of that business" does real work, and client classification can legitimately define the scope of an appointed representative's exemption and the corresponding scope of the principal's liability.

The judgement reinforces that consumer protection under FSMA operates primarily through prophylactic regulation — ensuring that only competent and appropriately authorised persons deal with each category of client — rather than through expansive ex post liability. Authorised persons and compliance teams structuring appointed representative arrangements should ensure that any limitation on client categories reflects genuine limitations on the authorised person's own permission and competence, and is clearly documented in the appointed representative agreement.

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