A group of 90 investors in the EEA Life Settlements fund are launching a class action against the FCA worth £8.5m.
The EEA Life Settlements Action Group has set a deadline of 14 February for investors to sign up to the action and says it hopes to reach £10m in claims.
The EEA Life Settlements fund has been experiencing difficulties since December 2011 when the fund was first suspended after the FSA labelled life settlement funds as “high risk, toxic products”.
Peter Lihou, who founded the group in February 2014, says the regulator’s statements were “factually incorrect” and caused a run on the funds.
He says: “The basis of the claim is that the FSA infringed human rights law by denying EEA Life Settlements investors access to their funds.
“We would urge any investors who wish to get involved to join the action before the deadline.”
Lihou says the group will send a formal letter to the FCA setting out the claim, and if a settlement is not reached with the regulator will take the case to the European Court of Human Rights.
An FCA spokesman says: “The FCA remains of the view that our intervention in this market was justified. The FSA issued guidance for consultation because it did not regard traded life policy investments as suitable investments for the mass retail market and was concerned that these investments may be reaching investors for whom they are not suitable.
“These concerns had been made public by the FSA a number of times before, but the industry had not heeded these warnings and the market showed signs of inappropriate expansion into the retail sector. The FSA issued the guidance for consultation to address urgent concerns about the growing risk of consumer detriment posed by the TLPI market.”