We assess all firms according to the risks that they pose to our objectives*. The risk is a combination of the impact if a problem occurs and the probability of that problem occurring.    Small firms are generally those that we regard as having a low impact individually if a serious problem occurs at the firm.

The factors we use to make our impact assessment include size, type of business and the amount of regulated business. These factors can mean that the organisation has a higher or lower potential to make an impact on these objectives. A large high street bank creates a higher potential risk overall than a smaller broker.

Using this classification, size is not judged solely by the number of employees or annual turnover because some large retail firms may only do a small amount of regulated business.  A large multi-million pound motor retailer may be classed as small because it only sells a relatively small number of insurance policies.  There are some types of firm which contain a substantial proportion of firms that are individually of low impact to the FSA's objectives and therefore classified by the FSA as smaller firms.

Apart from these examples there are some types of firm which are more obviously classified by the FSA as smaller firms. These are:

• mortgage advisers;
• general insurance intermediaries;
• financial advisers;
• credit unions;
• authorised professional firms;
• stockbrokers;
• asset managers; and
• friendly societies.

Our objectives are

• market confidence: maintaining confidence in the financial system;
• public awareness: promoting public understanding of the financial system;
• consumer protection: securing the appropriate degree of protection for consumers; and

• the reduction of financial crime: reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.