The Financial Services Compensation Scheme (FSCS) says it expects to recover "very significant" sums of money paid out as compensation to investors mis-sold Keydata bonds.
The FSCS is looking to recover the costs of compensation from both the assets of Keydata, the underlying investments and from firms who were responsible for selling the bonds to investors.
Law firm Herbert Smith is acting on behalf of the FSCS to recover monies from advisory firms guilty of mis-selling the products.
It has written to more than 500 businesses to start the legal process, but a number of these firms claim they did not sell the bonds, sold them following a compliant advice process, or have inherited clients who were sold them elsewhere.
The FSCS said it expects to make large recoveries.
"[We believe] the ultimate level of recoveries could be very significant," it said.
The FSCS added it was also taking action to recover compensation from firms responsible for the sales of payment protection insurance policies and some structured products.
It estimates its total legal and professional expenses to make major recoveries will be almost £4m for 2012/13, and £5.3m for 2011/12.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation