Smaller firms welcome FSA improvements but remain uncertain about policy developments, industry survey finds

Respondents to the 4 th survey of the Financial Services Authority's performance by the Financial Services Practitioner Panel, published today, identify the FSA's general and daytoday support of smaller firms as one of the areas in which welcome progress has been made since the survey was last conducted in 2004 – the Smaller Businesses Practitioner Panel (the Panel) is encouraged by these findings.

The creation by the FSA of the Small Firms Division as a resource dedicated to improving its understanding of, communication with and facilities available to smaller firms was seen as a specific contributor to this positive development. Other areas of improvement include satisfaction with firms' relationship managers – even some smaller firms have such arrangements the FSA's ability and willingness to provide useful guidance, the navigability of the Handbook, the Firms Online facility and the greater use of industry roadshows, seminars and similar events to convey FSA messages to smaller firms.

However, worryingly for both smaller firms and the regulator, the majority of smaller firms expressed confusion about what FSA initiatives such as Treating Customer Fairly (TCF) and principles based regulation actually meant for them at an operational level.

It would seem that continued improvement is required from the FSA in its communication efforts with smaller firms if the regulator wishes them to give proper consideration to new and developing policy or act swiftly to implement FSA initiatives. The fact that the FSA has done much to improve its engagement with and support for smaller firms will of course help facilitate communication with these stakeholders. The Panel is committed to working with the FSA to help close this communication gap further going forward.

Mark Rothery, Chairman of the Panel, said: "We are pleased that the Practitioner Panel survey recognises the FSA's considerable efforts
to improve its dealings with smaller firms – such attention is critical given the sheer size of this community. The Panel has also noticed a marked improvement in the way in which the FSA approaches smaller firm issues now – a development to which, I would hope, the Panel itself has contributed in no small part. The establishment of the Small Firms Division represent an important step in the direction of giving such firms due focus and priority."

"However, the disappointing response to the questions about important FSA policy developments such as principles based regulation and TCF is a strong indicator that a lot of work remains to be done. The fact that a considerable proportion of smaller firms report that they are now considering leaving the industry due to the growing burden and cost of regulation should make FSA staff pause for thought. Improvements to the FSA's Firm
Contact Centre, the RMAR regulatory reporting framework and the regulator's communication and engagement with smaller firms – while showing signs of progress are key areas where further enhancements are essential and could make a real difference to smaller firms' views of the FSA in the future. "

"There are signs that the FSA has begun to raise its game in respect of smaller firms. Now is the time to double those efforts, as the FSA moves towards a more principles based regime and embarks on the implementation of major policy initiatives, such as TCF and MiFID, where smaller firms continue to feel apprehensive about what the future holds for them. The Panel looks forward to working with the FSA on solutions to some of the problems identified in the survey, to help create a regulatory environment in which smaller firms can thrive and prosper."

Notes to Editors

The Practitioner Panel survey of regulated firms is an authoritative, indepth piece of research, providing feedback from the financial services industry on the FSA's performance over time. It also gives the Panel a solid and informed basis on which to suggest improvements to the FSA, and also to give credit where it is due. Over 4,000 firms from across all sectors of financial services activity and size of business responded to the survey, which for the first time also captured the views of the newly regulated mortgage and general insurance (M&GI) population of firms.
The Smaller Businesses Practitioner Panel (the Panel) was established by the Financial Services Authority (FSA) in 1999 to represent the views and interests of small regulated firms. Its membership is drawn from smaller firms across all sectors of regulated business. Until June 2005, the Panel was known as the Small Business Practitioner Panel.
The Panel believes that smaller firms have a crucial role to play in a healthy and competitive financial services marketplace and in providing consumers with choice, service and flexibility.
The Panel can be contacted by email through its secretariat function at the FSA sbpp@ or in writing c/o the Independent Panels Secretariat at the usual FSA office address.
Further information about the role and work of the Panel can be found on its website:
Mark Rothery, the Panel Chairman, is an ex officio member of the Financial Services Practitioner Panel (which has statutory independence from the FSA) to help ensure that smaller firms are properly represented at the very highest level within the Financial Services and Markets Act 2000 accountability framework. Information about the Financial Services Practitioner Panel can be found at:
The FSA's website address is: