Keydata Investment Services has hit out at the FSA saying the regulator did not need to declare it insolvent and there "was another route out".
A source close to the structured product (SP) administrator, which has £2.8bn assets under management, says it does not agree with the FSA's decision and believes it has not acted in the best interests of the 85,000 consumers affected.
It says it offered the FSA another option rather than to be declared insolvent but this was rejected as the regulator argued Keydata was unable to meet its liabilities.
"If the FSA hadn't taken this action then there wouldn't be this uncertainty for consumers and the FSCS would not have to be involved," according to the source.
It is believed the underlying assets, which are ring fenced, could have been sold to another group without the added uncertainty of the insolvency for consumers.
SP services and administration provider Opal has already offered "ongoing support for all portfolios" following Keydata's plight. It says it has been in contact with FSA-appointed administrator PricewaterHouse (PwC) and is ready to "step into the breach within days" if necessary.
Keydata does not believe investors will lose money as a result of the insolvency and PwC has also said there is "no early suggestion people will necessarily lose money".
However, the PwC spokeswoman says the process may not be quick, adding it could take "anything between two weeks and 10 years" to complete.
Dan Schwarzmann, joint administrator and partner at PWC, says: "Our focus is the consumers. This is a complex situation and we know many investors will have serious concerns. We will do all we can to get a clear understanding of the position as soon as possible."
PwC adds the following Venture Capital Trusts (VCTs) are separate legal entities and not subject to the administration: Keydata AIM VCT plc, Keydata AIM VCT 2 plc, Keydata Income VCT 1 plc and Keydata VCT plc 2.
A spokesperson for the Financial Services Compensation Scheme (FSCS) says it is too early at this stage to say what its involvement will be.
"We don't know if we have a role but we are working closely with the administrators at the moment. If it is clear that investors have suffered a financial loss as a result of Keydata going into administration then we may be able to pay compensation. We have not declared Keydata in default."
Investors, IFAs and other interested parties can contact 020 7804 4424 (PWC) for more information.
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Some 2,000 consumers affected