The Financial Services Authority (FSA) has stated that despite the common perception, small retail firms are not "under the radar" when it comes to regulation.
By using a risk-based approach, the regulatory body can monitor a great deal of small firms effectively and take action against those that represent a risk to consumers.
Regulatory returns, information from various sources and the results of supervisory and thematic work all combine to keep the FSA well informed about small retail firms.
At a recent conference for financial advisors, Stephen Bland, director of small firms, said: "We are sending a very clear message that small retail firms are not under the radar.
"Our regulatory approach is based on giving help to firms who run their businesses while treating customers fairly and endeavouring to do the right thing."
However, the FSA will "come down hard" on firms that do not treat their customers properly, Mr Bland added.
Earlier this year, the FSA stated that it is seeing better cooperation from upper levels of the financial services industry on the treating customers fairly initiative.
To keep up momentum, the FSA has set a deadline of December 2008 for businesses to demonstrate that they treat their customers fairly.
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