Financial Markets Disputes View: April 2026

What's coming up

Legal Professional Privilege in Tax Matters - How does legal privilege apply to tax investigations in key European jurisdictions? What do tax professionals need to have in mind when dealing with privilege issues? Join our panel of experts, including Colin Passmore, former Simmons & Simmons senior partner and author of "Privilege", who will provide practical tips. Register now.

AI x Dispute Resolution webinar series 2026 - this series running from now until December is designed for in-house counsel, risk and compliance professionals, and business leaders seeking practical, up-to-date insights into AI disputes. More details are available here.

Supreme Court Clarifies Firms' Liability for Appointed Representatives' Unauthorised Retail Business

In Kession Capital Ltd (in Liquidation) v KVB Consultants Ltd and others [2026] UKSC 11 the Supreme Court confirmed that an authorised firm can effectively limit its liability under section 39 FSMA for the acts of its appointed representatives (ARs) by clearly restricting the AR's mandate to professional clients and eligible counterparties only. The Court held that dealings with retail clients can constitute a distinct "part" of a firm's business, meaning that where an AR agreement expressly excludes retail business, the principal firm will not be responsible under section 39(3) when the AR deals with retail clients in breach of that restriction. In reaching this conclusion, the Court rejected the Court of Appeal's more expansive, investor-protection-driven reading and instead focused on the natural meaning of "part of that business", noting that the retail/wholesale distinction is well-established in financial services and carries real regulatory weight under FSMA.

Practical implications

• Draft AR agreements with precision. Firms should ensure that any restriction by client type is set out expressly and unambiguously in the AR agreement - specifying which regulated activities, for which client categories, and in what markets or products - as ambiguity is likely to be resolved against the firm.

• Align AR mandates with Part 4A permissions. AR agreements should mirror the firm's own FCA permissions in straightforward terms rather than relying on generic obligations to comply with FSMA and FCA rules. Existing agreements should be reviewed to ensure any client-type segmentation is internally coherent and consistent with the firm's permissions schedule.

• Strengthen governance and monitoring. The judgment places a premium on credible controls around the AR perimeter - including documented training, monitoring of client categorisation, file reviews, and management information to flag any AR activity in retail channels.

• Treat client categorisation as a key control. Even though misclassification does not automatically bring the principal back into scope under section 39(3), poor categorisation processes can create significant exposure through other routes, including FCA enforcement and claims based on breaches of COBS and SUP 12. Standardised questionnaires, documented assessments, and periodic audits of categorisation decisions are essential.

Motor finance

On 30 March the FCA confirmed the terms of its compensation scheme for motor finance customers and appeared to be giving all parties involved something, presumably in an attempt to avoid challenges. It made several changes to the free to use scheme in response to conflicting feedback from consumers, their representatives, firms, manufacturers and industry bodies. The eligibility criteria have been tightened, average compensation increased for older agreements and a minimum 3% compensatory interest rate per annum added. Payouts will be capped in around 1 in 3 cases to ensure no one is put in a better position than had they been treated fairly. 12.1 million agreements made between 2007 and 2024 are now eligible for compensation, fewer than under the FCA's original proposals. The average payout has increased to around £830 per agreement. The FCA estimates that 75% of eligible consumers will make a claim. Despite these changes, a group called Consumer Voice has issued a legal challenge on the basis that the scheme as designed fails to deliver adequate redress. A possible challenge brought on behalf of the lenders represented by the Finance & Leasing Association has been dropped – a fact which Consumer Voice have suggested says something about the scheme. However, it is also understood that challenges are to be made by three lenders. If these cases proceed, it would mark the first time an FCA redress scheme has been challenged in court.

FOS award limits increase from 1 April 2026

The FCA has confirmed the annual increase to the Financial Ombudsman Service (FOS) award limits, effective from 1 April 2026. The maximum amount the FOS can require a financial business to pay when upholding a complaint has risen to £455,000 for complaints about acts or omissions by firms on or after 1 April 2019 (an increase of £10,000 on the previous year), and to £205,000 for complaints about acts or omissions by firms before 1 April 2019 (a rise of £5,000 over the previous year). The award limit is adjusted each year in line with inflation, as measured by the Consumer Prices Index (CPI). Since the limit was first set at £350,000 in April 2019, it has now risen by over 30% to its current level. This steady upward trajectory is of particular significance for several reasons. First, the increased ceiling materially raises the potential financial exposure from individual customer complaints resolved through the FOS, a forum which - unlike the courts - offers no right of appeal save by way of judicial review. Second, in light of the FCA's Consumer Duty, firms are expected to deliver good outcomes for retail customers and to proactively identify and address foreseeable harms; rising FOS award limits underscore the importance of robust complaints-handling procedures and effective early-stage resolution to control potential liabilities. Third, for firms operating in higher-value sectors the increased limits mean that a single adverse FOS determination can have a significant impact on provisions and professional indemnity insurance costs. Firms should ensure that their complaint-handling frameworks, staff training and internal escalation processes are reviewed and, where necessary, strengthened to reflect these higher limits and the broader regulatory environment.

Legal advice privilege can apply to communications not involving a lawyer

In Aabar Holdings SARL v Glencore Plc, Picken J delivered a significant ruling on the scope of legal advice privilege within corporate organisations, narrowing the practical impact of the widely criticised Court of Appeal decision in Three Rivers No 5 (3R5). That 2003 decision held that, for the purposes of legal advice privilege, the "client" within an organisation is limited to those individuals authorised to instruct solicitors - meaning that factual communications from other employees gathered to inform legal advice often fall outside the protection of privilege. Picken J has now clarified that 3R5 was not intended to be an exhaustive statement of the law and, critically, was not authority for the proposition that communications between members of the designated client group are themselves unprivileged. This is the second major privilege ruling by Picken J in this case, following his November 2024 finding - since endorsed by the Privy Council - that the so-called "Shareholder rule" does not exist.

For in-house legal teams, this judgment provides a degree of reassurance: individuals within a company who are tasked with seeking, collating, and processing legal advice may now communicate with one another in the knowledge that those intra-group communications should be protected by legal advice privilege in any subsequent litigation. While the decision does not overturn 3R5 itself - a step that would require the Supreme Court - it meaningfully reduces the risk that internal coordination around the obtaining of legal advice will be treated as disclosable. For more analysis, see our article here.

Enforcement

The FCA published a Final Notice censuring Sapia Partners LLP for failures in its client money controls. Sapia began working with WealthTek in 2013 and later appointed it as one of its appointed representatives, making Sapia responsible for holding and protecting client money arising from WealthTek's activities. The FCA found that Sapia did not put sufficient safeguards in place to protect that money, and Sapia admitted that it had failed to properly segregate key roles: individuals who could make payments from client money accounts were also responsible for carrying out the oversight checks on those accounts required under the CASS rules. Sapia has agreed to make a voluntary payment of £19,637,950, which will be distributed to WealthTek clients who have a shortfall in the money they have been able to reclaim. The FCA decided not to impose a financial penalty on Sapia in view of what it described as the firm's "exemplary cooperation" and its acceptance that it should make the voluntary payment; had Sapia not done so, the FCA would have imposed a penalty of £7,412,000 (after applying the standard 30% early settlement discount).

The London Metal Exchange has fined member firm BNP Paribas £120,000 for breaches of the Exchange's rules relating to risk management systems. The violations concerned the bank's repeated failure to submit timely commodity position reports on several occasions during September 2024, as well as its failure to submit options volatilities data on 16 business days in the same month. While the quantum of the fine is relatively modest in the context of a major global banking group, the decision is a timely reminder that exchanges and trading venues continue to take a robust approach to the enforcement of reporting obligations and risk management requirements. The case underscores several practical points: first, that apparently routine operational reporting failures can attract meaningful regulatory censure; second, that a history of prior non-compliance - even where the earlier sanction was minor - is likely to be treated as an aggravating factor; and third, that risk management systems must be maintained not merely as a matter of good practice, but as a specific regulatory obligation subject to ongoing supervisory scrutiny. The decision sits within a broader trend of trading venues and regulators emphasising the importance of robust internal controls and accurate, timely reporting as essential pillars of market integrity.

Cases

For a change this month our quick round-up cases both relate to mortgages one going in favour of the bank and the other, in the borrower's favour.

In FH Holding Moscow Ltd v AO Unicredit Bank & Unicredit SpA [2026] EWCA Civ 468 the respondent bank was entitled to levy execution against a property under a mortgage agreement subject to Russian law and jurisdiction without first obtaining an award from an arbitral tribunal in Vienna pursuant to a clause in a separate Facility Agreement. The court concluded that it was "not easy to see why this issue has anything to do with English law or the English court".

In Shukla v St James Bank & Trust Company Ltd and another [2026] EWHC 851 (Comm) summary judgment was given to the borrower, as the existence of the borrower's equity of redemption meant that the lender had an implied contractual duty to cooperate with the borrower to allow the borrower to redeem the loan. Contractual provisions which acted as a clog on the borrower's right to redeem were repugnant to the purpose of the agreement and therefore void.