The Financial Services Authority (FSA) spotted flaws with the Arch Cru marketing literature and ordered changes before the funds' suspension, Treasury financial secretary Mark Hoban has claimed.
Lawyers representing investors in the funds said they were unaware the regulator had changed any material.
The apparent intervention by the FSA was mentioned by Hoban during the latest meeting of the Financial Services Bill Committee on Thursday.
Asked by shadow minister Chris Leslie what powers the Financial Conduct Authority (FCA) would have to tackle misleading promotions, Hoban said it would be able to tell the public if and when action had been taken to pull or change promotions.
Then he said: "It is important that people are aware of what advertising has been stopped," he said. "One case that crops up every so often is Arch Cru.
"Arch Cru was first identified because the FSA looked at its marketing material.
"Perhaps if the FSA had been able to publish the fact that it had looked at Arch Cru's marketing material and had that material changed, a message might have been sent to others."
Gareth Fatchett, a solicitor at Regulatory Legal, which is seeking a judicial review into a £54m compensation package offered to investors by the FSA, BNY Mellon, Capita and HSBC, said Hoban's comments suggested the FSA clearly recognised there were problems with the Arch Cru marketing.
He said: "Why not be decisive and withdraw permission to prevent what is now a larger mess?
"Impotent regulation has meant investors suffer. That cannot be right and the FSA should have been more active in obtaining a better deal for investors."
The FSA is expected to soon reveal the outcome of its investigation into firms which recommended Arch Cru investments before the funds were suspended in March 2009.
In June last year, the FSA, Capita Financial Managers, BNY Mellon Trust & Depositary and HSBC Bank offered a compensation package worth £54m to Arch cru investors.
It said this would assist the return of a substantial part of their investment.
The Financial Services Compensation Scheme recently told Arch Cru investors that eligible claims for compensation "may exist" against some failed independent financial advisers (IFA).
The FSA was unavailable for comment.
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