The FSA has launched a three-month consultation into establishing a consumer redress scheme to compensate Arch cru investors.
If the scheme is set up all firms which sold Arch cru funds would have to contact clients to let them know if their case falls within the remit of the scheme within four weeks.
Where redress is due, firms would use an FSA online calculator to calculate each payment, which also takes into account how much money investors can claim from the separate £54m compensation scheme which has already been set up.
Investors should receive notification of how much redress is due within six months and receive payment within 28 days of accepting.
The scheme will be the first time the regulator has set up a customer redress scheme using powers which were updated in 2010.
The FSA says the move could pay £110m in redress to between 15,000 and 20,000 consumers. It comes on top of the £54m payment scheme announced last year involving Capita Financial Managers, BNY Mellon and HSBC Bank, with investors put into the position they would have been in if they had not invested in the funds.
The regulator has developed a template that firms would have to follow to determine if sales were unsuitable. The FSA says firms will have to report on the progress of their review. It estimates the cost of the scheme will total £6m to £11m.
FSA director of conduct supervision Clive Adamson says: “We have found significant evidence that investors looking for lower risk investments have thousands in these funds. It is right that these consumers are put back in the position they expected to be in when they took the advice.
“This is the first time that we have used this consumer redress power and it is going to form an important part of our consumer protection tool kit. We will be working hard to reduce the number of large scale failures. But where they do occur it is imperative that we can get redress to consumers who have lost money through misselling as fast as possible