The regulator says it is concerned over whether land banking schemes are collective investments and therefore subject to regulation.
Schemes that are deemed to be collective, but where there is no regulation, would be operating illegally.
It is estimated that at present there are around 50 companies which are operating schemes whereby land is bought up and then sold off to investors in small parcels in the expectation that when planning permission is granted the value of the land will increase.
Some financial advisers have been tempted to put clients into land banking after being told that, with planning permission, the value of the land could go up massively.
But with the current suspension of trading by Land Heritage (UK), the FSA now wants it to be clear which companies are offering collective investments and which are not.
For land banking companies that are deemed to be offering a collective investment, the FSA is now looking at altering the detail of the regulation so that the investors are given more say over the specifics of the investment.
Speaking to Money Marketing a spokeswoman for the FSA said that financial advisers thinking of putting clients into land banking should be careful of going into unregulated schemes.
The spokeswoman said: If the company is in fact operating a collective investment then it must be regulated and if it is not then it is operating illegally.
It is estimated that as many as 500 investors have paid up to 15,000 each for a small slice of a site of a Land Heritage (UK) site near Uckfield in Sussex.
But the local authority has been indicated there is no possibility of granting planning permission in the near future and the investment does not look as sound as it did.
It is unclear what will happen to the money that the investors have put in.