The European Life Settlement Association (ELSA) has blamed the "sensationally negative" FSA for damaging the traded life policy sector (TLPI) sector.
The regulator announced its intention to ban the sale of TLPIs to retail investors in November, labelling them "Ponzi schemes".
It followed a number of high-profile scandals in the sector, most notably Lifemark-backed Keydata.
But chairman Patrick McAdams criticised the FSA's inflammatory language, which led to the suspension of the £600m EEA Life Settlements fund in December after "unprecedented" redemptions.
In a letter sent to members today, McAdams said the FSA's attack had "reverberated heavily" around the world.
"We continue to be fully committed to total transparency," he said. "As an industry, we need to take a long look in the mirror. We must be honest with ourselves and ask why the FSA have felt the need to issue such statements.
"Unfortunately, a minority of product promoters/managers continue to undertake bad practices that will likely have a negative impact on their investors and result in additional negative press about the market.
"Yet, just as importantly, there is also a highly-ethical approach to working in this industry. The market has been hurt by sensationally negative remarks from the FSA."
McAdams called for a self-enforced code of conduct drafted by ELSA members.
"We must raise standards and, above all, create the expectation among investors that anyone promoting a life settlement product will be observing the code.
"Most investors are unable to analyse and compare products, or decide which product is most suitable for them.
"We therefore also need to standardise valuation methodology. Such vital measures will, I trust, give investors the protection, security and confidence they need."
HL and Liberty SIPP slowest
Lifetime and annual allowances
'IFAs bore the brunt'
'Recovery or boom'