The FCA is in the process of creating a redress deal for investors that were in the failed Connaught Series 1 fund.

The regulatory body has said that for a limited period it will support those concerned in an attempt to reach a resolution leading to appropriate redress for investors as quickly as possible.

In September 2012, Connaught entered administration following the collapse of its Income Series 1, 2 and 3 unregulated collective investment schemes. These provided credit lines to stricken bridging Tuita, a firm that also went into administration at the same tie.

An estimated £118 million was invested in the scheme.

It is believed that the parties which the FCA will try to broker a deal with are the administrators of Connaught Asset Management and Tuita - the fund’s operator Blue Gate Capital, investors represented by the Connaught Action Group and HMRC.

In a statement surrounding the development, the FCA commented: “We encourage the parties concerned to engage constructively with us and each other for this limited period to avoid potentially lengthy and costly alternatives to a negotiated settlement.

"This is a voluntary and confidential process, and so we will be unable to comment further on its progress until an agreement is reached or negotiations break down.”

The FCA added: "The FCA is focused on securing fair redress for those who invested in Connaught Income Funds."

Connaught's liquidators have since agreed an £18.5m settlement with former fund operator Capita.