The Serious Fraud Office decided to drop an investigation into Equitable Life because financial regulators were already aware of potential criminal activity at the failed insurer, according to a new document.
The document also raises the possibility that every pension sold by the firm between 1982 and 2000 was mis-sold, according to the Financial Mail.
In a key passage the document states: '...in very many cases, transactions, activities and representations which might be considered to be criminal offences were known to the regulators.'
It added: 'It is therefore very likely that potential defendants would raise many defences based on having disclosed what they were doing to the regulators and having received their approval, or at least not received their disapproval.'
The 19-page 'vetting note' dating from December 2005 has been published following a Freedom of Information request.
The SFO probed the insurer in March 2004 after the publication of a damning report into its collapse by Lord Penrose.
But in December 2005 it angered policyholders by announcing it would not press ahead with a criminal investigation.
The Mail last month revealed how the SFO had been ordered to publish its reasons by the Information Commissioner's Office - a body set up to protect the public's right to data.
It followed a Freedom of Information request lodged two years ago by equitable victim Stephen Wynn.
The SFO ruled that prosecuting former directors could "lead to a further loss of confidence in the pensions industry as a whole", the Mail reports.
It stated there 'is a potential that all the Society's sales of pension products to individuals between 1982 and 2000 were mis-sold'.
However, it concluded: "This again is a matter for the regulator or for civil action and not for criminal prosecution."
The revelations have angered Equitable's policyholders who have been fighting for compensation for over a decade. The Coalition government announced a £1.5bn compensation package for victims last October, but victims say this represents a fraction of their losses.
The FSA declined to comment.
Achievements, charity work and other happy snippets
Laughable excuses for persisting
Spent 56 years at Schroders
Warns on profits