The FSA says just 12 per cent of Arch cru sales were found to involve suitable advice based on an external file review of a small number of cases.
The regulator published a consultation paper this week on plans to implement a £110m consumer redress scheme for between 15,000 and 20,000 Arch cru investors.
Firms will be required to assess whether recommendations to invest in Arch cru were suitable and, if not, pay redress.
The FSA is looking to impose the redress scheme based on the results of the external file review.
The regulator says it has identified 795 firms it believes sold Arch cru funds.
A sample of 24 firms was drawn from the total, with 179 files reviewed from those firms to assess the suitability of the advice given.
The results showed 12 per cent, or 22 sales, of the files reviewed were found to be suitable. A further 10 per cent, or 17 sales, were rated as unclear while in 78 per cent of cases, or 140 sales, the advice was found to be unsuitable.
Of the 24 firms reviewed, 19 had missold in at least half of their reviewed sales.
Of the 22 sales that were deemed suitable, 14 of these came from two firms.
The FSA says: “We believe the file review exercise clearly demonstrates a high level of unsuitable advice and inadequate disclosure by the firms reviewed as well as a lack of apparent due diligence conducted into the Arch cru funds.”