In the context of FCA regulations, what does 'proportionality' refer to?

Proportionality in the context of FCA regulations refers to the principle that the regulatory requirements imposed should be commensurate with the scale and complexity of a firm's business operations. This means that the regulatory framework is designed to ensure that smaller firms are not subject to the same level of regulation as larger, more complex firms. It acknowledges that different firms have different risk profiles and operational complexities, and the regulations should be tailored accordingly to provide adequate oversight without stifling business growth or innovation.

The application of proportionality helps create a fair regulatory environment where the burden of compliance does not overwhelm smaller firms while still ensuring that all firms operate responsibly and protect consumers. This principle encourages a risk-based approach to regulation, allowing the FCA to focus its resources where they are most needed based on the size and impact of firms in the marketplace.