Vulnerability in Financial Regulation: The Case of SMEs

Abstract

SMEs are the driving force of economies. For many years, this supported, somewhat ironically, the neglect in designing a coherent regulatory framework to ensure their fair treatment. But the reality is that many SMEs face information asymmetries, lack resources and negotiation power and in the absence of regulatory protection are exposed to harm. In recent years, mounting ad-hoc, eclectic responses have mushroomed to address various aspects of appropriate conduct standards, dispute resolution and accountability. While these mechanisms allow for adaptability and dynamism, they may prove to be inadequate to achieve the FCA’s consumer protection objectives. This article proposes to broaden the application of vulnerability, which was initially designed with natural persons in mind, to guide the fair treatment of SMEs. It argues that expanding the application of vulnerability to SMEs would reflect the hybrid nature of this business model which is often akin to that of individual consumers. Conduct of business, Vulnerability, SMEs, FCA perimeter, Regulated activities, Commercial lending, Industry codes of conduct, Senior Managers and Certification Regime, Dispute resolution and redress, The Financial Markets Test Case Scheme, Business Lending Standards