Enhanced Strategy for Smaller Firms

The FSA’s ‘Enhanced Strategy for Smaller Firms’ is the FSA’s approach to increase regulatory contact and engagement with smaller authorised firms. This was established in 2007 to pursue a cost-effective and efficient approach for the supervision of small firms. We continue to support this strategy and have regular meetings with the FSA to receive updates on its progress.

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The ‘Enhanced Strategy’ is the means by which the FSA is able to make contact with large numbers of smaller firms, who do not routinely receive visits but otherwise provide information by means of electronic reporting (RMAR).

We have encouraged the FSA to invest in Enhanced Strategy for Smaller Firms: the vast majority of regulated firms not only welcome this interaction with the FSA, but feel it greatly improves their ongoing relationship with the regulator.

Supervision of Low Impact Firms

We reviewed the results of the Practitioner Panel’s Fifth Survey of the FSA’s Regulatory Performance in December 2008, in regard to smaller firms. These highlighted a number of areas we have considered with the FSA, and these are as follows:

  • smaller firms in particular still perceive the FSA to offer poor value for money and tend to be less satisfied than larger firms who experience a much closer relationship with the FSA. Smaller firms are also more likely to be concerned about retrospective regulation (as a result of the move to more principles based regulation), more inclined to agree that the FSA focused on consumer protection to the detriment of other objectives and more likely to feel that regulation was not in consumers’ interests;
  • smaller firms felt that consultation documents and the monthly regulatory email were insufficiently targeted and they felt overwhelmed by the volume of material received. There was also considerable dissatisfaction with the FSA website;
  • smaller firms were much more likely to perceive regulation as a burden and more likely to agree that the costs of compliance were harmful to their firm and had resulted in them reducing the types of business they conducted;
  • there was concern among smaller firms that the FSA does not show an understanding of them in developing regulatory policy and does not consider the resultant impact of regulation on them. Smaller firms are also more likely to consider the FSA to be adversarial in its approach to supervision.

We have been greatly encouraged by the manner in which the FSA is seeking to address these main areas of concern. The Panel is impressed by the progress already made and has offered its services to help with this extremely important project.

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What the SBPP has said previously on this topic:

During 2008, the Panel continued to work closely with the FSA on this initiative to evaluate its effectiveness and monitor how smaller firms are experiencing its application in practice.

During 2007, the Panel welcomed the FSA’s intention to increase regulatory contact and engagement with smaller firms, as announced in October 2007, through the Enhanced Smaller Firms Strategy. The FSA started to implement its new strategy by introducing an ongoing programme of structured visits, including telephone assessments, to test the progress made by smaller firms towards, in particular, embedding the Treating Customers Fairly (TCF) initiative into their business culture.

 

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