The regulator had been in negotiations with the liquidator of the fund, Capita and Blue Gate to see if agreement could be reached on how to address losses in the unregulated collective investment scheme (UCIS), but has now withdrawn while the investigation into their activities is conducted.

“Due to the level of public interest in the fund, it was decided to make this decision public, but there will be no further comment until investigations reach a conclusion,” the FCA said in a statement on 10 March.

“The fact that a firm is under investigation does not mean that the FCA has reached any conclusions on whether any wrongdoing has occurred.”

The FCA had extended the period for settlement negotiations between the parties more than once, prior to the announcement of its investigation.

Connaught entered administration in September 2012 after the collapse of its Income Series 1,2 and 3 unregulated collective investment schemes (UCIS), which provided credit lines to stricken bridging lender Tuita, a firm that also went into administration in September 2012.

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About £118m was invested in the scheme.