In Ovcharenko and Moskaltsov v Investuk Limited and Anglo-Sino Capital Partners Limited the High Court addressed several issues concerning the liability of a principal firm for the loss caused by the acts of its appointed representative (AR) and the application of s. 39(3) of the 2000 Financial Services and Markets Act (FSMA).

Under s. 39(3), a firm which has engaged an AR is liable for that representative’s acts and omissions when carrying on the business for which it has accepted responsibility, “to the same extent as if he had expressly permitted it”.

In refusing to overturn a default judgment, the court held that:

  • The claimants could rely on s. 39(3) as a clear and freestanding statutory basis of liability (which is not linked to the law of agency). The principal firm’s argument that it was not liable to the claimants on the basis that the AR had acted outside the scope of the AR agreement was rejected. The Court held that the AR agreement regulate the position inter se between the principal firm and the AR. To construe the AR agreement otherwise would deprive the AR’s clients of the failsafe protection under s. 39(3).