What does the principle of 'proportionality' mean in FCA regulations?

The principle of 'proportionality' in FCA regulations emphasizes that regulatory requirements should be appropriate and reasonable in relation to the size and complexity of the firm being regulated. This means that larger, more complex firms may be subject to more stringent regulations, while smaller firms with simpler operations may face lighter regulation. This approach aims to ensure that the regulatory burden is tailored to the actual risks posed by different firms, allowing for effective oversight without imposing undue constraints on smaller or less complex entities. This principle is vital for creating a balanced regulatory environment that nurtures competition and innovation while maintaining consumer protection and financial stability.