Kession Capital Ltd (in Liquidation) v KVB Consultants Ltd and others

Under section 39 of the Financial Services and Markets Act 2000, an authorised person may accept responsibility for only part of a prescribed business carried on by its appointed representative. A class of clients, including retail clients, may define such a part.

The appointed representative’s statutory exemption and the principal’s responsibility are coterminous with the written acceptance of responsibility. A restriction excluding retail clients therefore limits both. This differs from a contractual requirement governing how permitted business must be conducted, breach of which does not remove the principal’s responsibility.

Consumer protection is served principally by ensuring that representatives conduct only business for which they and their principals are competent, appropriately authorised and able to provide supervision.

Kession Capital Ltd was an authorised person whose regulatory permission and appointed representative agreement excluded relevant dealings with retail clients. Its appointed representative promoted property-investment schemes to investors whom it classified as professional clients. The schemes failed, and the investors alleged that they were retail clients.

On an application for summary judgment, the High Court held Kession responsible under section 39(3) of the Financial Services and Markets Act 2000 for the representative’s dealings with those clients: [2023] EWHC 1686 (Comm). A majority of the Court of Appeal affirmed that decision: [2024] EWCA Civ 765.

The issue before the Supreme Court was whether dealing with retail clients constituted a “part” of the prescribed business for which Kession could withhold permission and responsibility under section 39.

Appeal allowed unanimously. Lord Richards gave the judgment, with which Lord Lloyd-Jones, Lord Sales, Lady Rose and Lady Simler agreed.

1. Section 39(1) of the Financial Services and Markets Act 2000 permits an authorised person to accept responsibility in writing for the whole or only part of a prescribed business. The appointed representative’s exemption from the general prohibition and the principal’s responsibility under section 39(3) are coterminous. Activities outside the accepted part remain subject to the general prohibition and its criminal and civil consequences.

2. Dealing with retail clients is capable of constituting a “part” of the business of advising on investments or arranging deals in investments. That is the ordinary meaning of the statutory language. The distinction between retail and professional clients is also a significant feature of the regulatory regime, and the FCA may impose the same kind of client limitation upon an authorised person’s own permission.

3. The statutory scheme is primarily prophylactic. It protects consumers by ensuring that an appointed representative conducts only business for which it is competent and is supervised by a principal with suitable experience, expertise, controls and resources. Requiring a principal to assume responsibility for retail business which both the principal’s permission and the representative agreement exclude would undermine that structure. It would also confer an excessively broad exemption upon a representative acting in breach of the restriction.

4. The distinction drawn in Anderson v Sense Network Ltd between what business may be conducted and how permitted business is conducted remained valid. A principal cannot avoid responsibility by requiring permitted business to comply with regulatory standards. Such a requirement concerns how the business is conducted. By contrast, a restriction to professional clients defines the scope of the permitted business itself.

5. Client classification is not equivalent to assessing investment suitability. Many classifications depend on objective criteria, retail status is the default, and the presence of some evaluative judgment does not prevent a category of clients from defining part of a business.

6. Kession was an “authorised person” for all statutory purposes, although acting outside its Part 4A permission would breach its regulatory obligations. Nevertheless, its written agreement did not accept responsibility for retail-client business. The court finally determined that Kession had no responsibility under section 39(3) for anything done or omitted by its appointed representative in carrying on such business.

1. United Kingdom Supreme Court: Allowed Kession’s appeal unanimously and finally determined that it had no responsibility under section 39(3) for its appointed representative’s retail-client business: [2026] UKSC 11.
2. Court of Appeal: By a majority, affirmed the High Court’s conclusion that Kession was responsible for the dealings with retail clients. Lewison LJ dissented: [2024] EWCA Civ 765.
3. High Court, London Circuit Commercial Court: Granted summary judgment against Kession under section 241 on the basis of its responsibility under section 39(3), while refusing summary judgment on two other bases: [2023] EWHC 1686 (Comm).