The nature and extent of the regulator's supervisory relationship with an intermediary depends on which factor?

The supervisory relationship that a regulator has with an intermediary is significantly influenced by the level of risk that the regulator perceives the intermediary to present regarding its statutory objectives. This is because regulatory bodies are primarily focused on maintaining market integrity, protecting consumers, and ensuring a stable financial system.

When an intermediary is deemed to present a higher level of risk—be it due to the nature of its business practices, the types of products it sells, or its overall impact on the financial system—the regulator is likely to take a more hands-on approach. This means more frequent audits, closer scrutiny of practices, or additional regulations may be applied to ensure that the intermediary complies with legal standards and is acting in the best interests of its clients and the market as a whole.

Other factors, while relevant to the operational context of the intermediary, such as its annual brokerage income or geographical scope, do not directly define the urgency or intensity of the supervisory relationship in the same way that perceived risk does. The number of awards made against the intermediary by the Financial Ombudsman Service could indicate issues, but it is the direct consideration of risk that fundamentally shapes how regulators engage with intermediaries to uphold their objectives.