This scheme could pay out over £100m in compensation and is in addition to the £54m redress scheme set up by Capita Financial Managers, BNY Mellon Trust and Depositary and HSBC Bank.

The new FSA scheme intends to ‘put investors back into the position they would have been in had they received suitable advice’.

This is the first time a scheme of this type has been consulted on.

Under the new scheme, all firms which sold Arch Cru funds would have to contact consumers to inform them if their case is eligible and calculate how much money the investor is able to claim. Investors should receive notification of their redress within six months and receive a payment within 28 days of accepting the offer.

Clive Adamson, FSA director of conduct supervision, said: “Investing money can be one of the most important decisions that anyone has to make and investors need to be able to trust the advice they are given. The Arch Cru funds were high risk and they should only have been recommended to investors who fully understood and were willing and able to accept the risks.

“This is the first time we have used this consumer redress power and it is going to form an important part of our consumer protection tool kit.”

Arch Cru funds were suspended in 2009 and Arc Cru’s failure affected over 15,000 investors. The funds were described by the FSA as ‘high-risk funds, sold unsuitably as low or medium risk, leading to significant consumer detriment’.

The consultation will close on 31 July.