The FSA's director of supervision at its conduct business unit, Clive Adamson, told an investor in the Arch cru funds that complaining to their IFA was the "best course of action" in order to get some form of redress, as the scandal broke in 2009.
In a private email sent to the investor in September of that year, after the funds were suspended and valuations had fallen as much as 40%, Adamson said the best result would be if ACD Capita paid compensation.
He said: "It seems the best case is that Capita make some sort of restitution for the lost value (unlikely to come from Arch as they don't really have any significant resources)."
However, Adamson - at the time director of the FSA's Major Retail Groups Division - said this "may take time and depends on Capita having sufficient resources".
As a result, he recommended the investor complained to their IFA as well as Capita.
"The best course of action is to make a formal complaint to any advisor you used and to Capita. If you don't receive satisfaction you can complain to the Financial Ombudsman Service," Adamson said in the email.
In the correspondence with the investor - understood to be an acquaintance of Adamson's - he also suggested other ways to put pressure on Capita, including speaking to national newspapers and going formally to the FSA.
His comments were made after the FSA had completed an Arrow visit to Capita to look at the Arch cru funds, prior to their suspension.
In the email Adamson also reveals the regulator had doubts over whether the Financial Services Compensation Scheme (FSCS) could ever be used to get redress for investors.
"The worst case is that there is no compensation and investors are stuck in the funds with uncertain prospects of recovery due to the nature of the underlying investments," he said.
"It is also not clear that compensation can be obtained from the FSCS compensation body as this can only be obtained under certain circumstances which may not occur here."
As well as advising making a complaint against their adviser, the main thrust of the email from Adamson is to focus on Capita's role.
So far Capita has contributed to a £54m redress scheme, funded by itself and the funds' depositories HSBC and BNY Mellon.
However, with such a small pot for compensation, most investors are expected to get back 70% of their investment at best, while also having been unable to access their cash for a number of years.
Many have looked to MPs to try and pressure Capita into compensating investors in what were labelled cautious funds, but this has yielded very little.
Mark Hoban, the financial secretary to the Treasury, last year told investors they were "free to challenge their IFA to see if their advice was appropriate" during a debate on the scandal.
An FSA spokeswoman said: "All consumers using a financial services firm regulated by the FSA have the right to complain to the firm and then the Ombudsman if they are not satisfied. This is a consumer right and we promote this fact as much as possible."
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