Small firms are far less satisfied with the FSA's performance than their larger counterparts in key areas such as the burden of regulation and their relationship with the regulator.
Although firms surveyed believed more forcefully in strong regulation than previously, 82% said the current regulatory system places too great a burden on firms.
Almost half of firms with fewer than 20 full time staff (44%) agreed strongly with this view compared to just over a quarter of firms with 20 or more staff.
Overall, since the 2006 survey there has been little improvement in regulated firms' overall satisfaction with their FSA relationship, with an improvement in understanding firms' businesses highlighted as a key areas where the regualtor could improve.
Firms with fewer than 20 staff remain less satisfied overall with most aspects of their dealing with the FSA then larger firms, the report found.
Only half of firms were satisfied with the FSA's performance in its supervisory role but 75% felt the level of supervision was reasonable for a firm of their size and type.
However, satisfaction with the FSA's Firm Contact Centre has improved (68% agreed) as well as the quality of guidance it provides.
The survey found there is a definite improvement in firms' views about the high costs of compliance but only one in ten firms (11%) rated the FSA highly in terms of offering value for money.
Relationship managed firms were far less likely to view the costs of compliance as excessive compared with firms without a relationship manager (21% compared with 47%).
Concern was also expressed about how the FSA's initiatives are implemented and communicated to the industry, including a degree of scepticism about the cost benefit analysis carried out in consultation papers.
Regarding MPBR in particular, there has been a deterioration rather than an improvement since the 2006 survey in the proportion of firms which agree the FSA has made it clear how MPBR will work in practice.
Although the MPBR has been in operation since 2006, fewer than three in ten firms (29%) agreed the FSA has made it clear how it will work compared to 37% in 2006.
There is also a real concern for 62% of firms that the MPBR may leave firms open to retrospective regulation. This was a particular worry for major groups, 80% of which felt they may be left vulnerable.
Just over half of firms (53%) believed the FSA has provided a clear explanation of how firms should implement TCF but this is an improvement on 39% in 2006.
The survey also showed a sharp decline in the rating of the FSA for maintaining confidence in the UK financial system with a fall from an average score of 5.5 to 4.3 out of 10. This was attributed to the fact the survey began in the spring of 2008; shortly after the FSA published its lessons learned review of Northern Rock.
In its response to the survey, Hector Sants, FSA chief executive, says the regulator recognises its understanding of firms and their business remains the major area where it needs to improve, and this has been identified as a priority for some time.
"We are taking significant steps to move forward with this and there are already some signs of improvement here.
"In the future, the Small Firms Enhanced Strategy means that small firms will have more regular contact with us, while the Supervision Enhancement Programme should lead to lower turnover in relationship managers and a better understanding of firms' business, both of which the survey identifies as key to improving firms' satisfaction."
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