The Financial Services Compensation Scheme (FSCS) has begun proceedings against more than 160 advisory firms it alleges mis-sold Lifemark-backed Keydata products.
Its lawyers, Herbert Smith, has issued protective proceedings against a total of 162 firms relating to sales of Lifemark Secure Income Bond 4.
The FSCS's aim is to recoup compensation paid out to investors in the product.
A letter from Herbert Smith, sent to the advisers on the list, accuses them of a breach of contract, namely that they "breached their contractual obligations owed to investors, including in particular their obligations to exercise reasonable skill and care in advising them".
The FSCS has also begun proceedings against firms that sold Lifemark Secure Income Plan 1, but it is not clear at the moment which firms are being pursued in those cases.
Hundreds more IFAs are also set to be contacted related to sales of other Lifemark plans in the coming weeks.
Its letters state that "any reasonably-competent IFA would or should have known that the Lifemark Products were high risk investments or at any rate higher risk than was appropriate for the relevant investors".
A spokesperson for the FSCS said the proceedings protect it against the possible expiration of the 'limitation period' for complaints.
It stressed its policy of pursuing recoveries "whenever practical and cost effective to do so".
Although the FSCS originally listed 211 firms as being subject to the latest proceedings, it reduced this number by 49.
Damian McPhun, a partner at Beale and Company, said: "Often the relevant IFA has gone into liquidation (with no insurance cover) so there is no prospect of the FSCS making any recovery."
McPhun, who represents some IFAs affected by the latest developments, added that more than a thousand firms are expected to be hit once the FSCS has gone through all the Lifemark-backed products.
In November, the FSCS sent letters out to 537 firms who had invested clients in SLS-backed Keydata products to begin attempts to recover the compensation it has paid out.
The FSCS spokesperson said: "We believe good claims exist against a large number of IFAs for loss suffered by investors who invested in certain Keydata Investment Services Ltd products."
Good governance v resources
UCITS rules need changing
Old age dependency ratio ‘outdated’
Scope for change post-Brexit
To tackle liquidity issues