(1)An agreement made by a person in the course of carrying on a regulated activity in contravention of the general prohibition is unenforceable against the other party.
(2)The other party is entitled to recover—
(a)any money or other property paid or transferred by him under the agreement; and
(b)compensation for any loss sustained by him as a result of having parted with it.
(3) “Agreement” means an agreement—
(a)made after this section comes into force; and
(b)the making or performance of which constitutes, or is part of, the regulated activity in question.
(4)This section does not apply if the regulated activity is accepting deposits.
Cases considering section 26 (48)
[2026] UKSC 11 · 1 April 2026
Agreements made by an appointed representative while conducting regulated activity outside its exemption are unenforceable against the other party. This consequence supported a construction limiting exemption to permitted business (see paras [11], [41], [70]).
[2026] EWCA Civ 346 · 23 March 2026Limits
Interprets the section as making an agreement entered into in contravention of the general prohibition unenforceable against the other party and conferring a recovery right against the contractual counterparty, not successors in title. (see paras [17]–[20]; [37]–[48])
Interprets the other party as the contractual counterparty to the agreement rendered unenforceable by the general prohibition. (see paras [18]; [38])
Interprets the recovery rights as directed to the contractual counterparty. The rights to recover money or property do not extend to successors in title. (see paras [18]; [38]–[48])
Interprets the right to recover money or other property paid or transferred under the agreement as a right against the contractual counterparty, not a successor in title. Section 28(8) points to recovery of value where property has passed to a third party. (see paras [38]–[48])
The absence of provisions governing successor liability and compensation calculation supported the conclusion that the remedy is confined to the contractual counterparty. (see para [44])
Defines the relevant agreement by reference to an agreement whose making or performance constitutes, or forms part of, the regulated activity. (see para [18])
[2026] EWCA Civ 2 · 5 January 2026Interprets
Section 26 was central to the loss analysis. Repayment of money received under section 26(2)(a) is matched by the receipt and does not itself create loss; potential compensation under section 26(2)(b) would be within the duty nexus in principle but was not fairly pleaded and would probably not exceed equivalent tortious or contractual claims (see paras [52]-[55]; [66]; [75]; [84]-[96]).
An agreement made in the course of an unauthorised regulated activity in contravention of the general prohibition was described as unenforceable against the other party. The judgment used that statutory consequence as part of the pleaded exposure but not as an independent source of recoverable loss (see paras [10], [78]).
The judgment distinguishes the statutory entitlement to recover money or property paid or transferred from the additional entitlement to compensation for loss sustained as a result of parting with it. The repayment element is subject to the pound-for-pound analysis; the compensation element did not overcome the appeal’s pleading and counterfactual difficulties (see paras [10]-[11]; [55]; [90]-[96]).
The entitlement to recover invested money was treated as matched by the money received by the claimant companies. It therefore did not, without more, establish recoverable loss in the negligence claim (see paras [52]-[55]; [86]; [92]).
Compensation is directed to loss actually sustained as a result of parting with money paid under the agreement. The judgment held that the pleaded case gave no fair warning of reliance on this subsection and considered it unlikely that the investors’ claims under it would exceed their equivalent claims in deceit or contract (see paras [85]-[96]).
28 more judgments, and what each says about section 26, are in the
case-law panel in the full Act.
71.Under this section, agreements concluded in the course of carrying on business in breach of the general prohibition will generally be unenforceable against the customer. However, the customer can still recover any money paid or property transferred and obtain compensation for any loss.