The FSA has minimum requirements or threshold conditions that all firms must fulfil in order to become and remain regulated.
Figures show that the FSA cancelled the permissions of 151 small firms in 2006/07.
The majority of small firms who failed to fulfil the threshold conditions did so for not submitting their Retail Mediation Activities Return (RMAR), which is part of the FSA's electronic reporting system, despite reminders.
Stephen Bland, director of small firms at the FSA, said: "The action we take against firms who do not comply with our minimum standards and our tough stance on firms' continued failure to submit the RMAR is working. Ensuring that firms implement and maintain these conditions is a priority for us. While our main emphasis is on helping firms to correct problems where possible, we take appropriate action when firms fail to comply with the conditions.
"Most small firms chose to fix any regulatory requirements that they were not fulfilling in order to stay in business. However, some decided to leave the regulated industry. In other cases we removed firms' permissions to carry out regulated business as they either could not or would not make the necessary changes to comply."
