The mini-bond holders are seeking a review of how many of their claims for compensation have been rejected as being outside the Financial Services Compensation Scheme’s remit.

Judicial reviews challenge the legality of the process followed by a government body, rather than the outcome itself.

In May, the FSCS blamed potential claims from the London Capital & Finance (LCF) mini-bond scandal for an additional £44m cost in its £649m 2020/21 budget.

The lawyers representing the disgruntled investors, Shearman and Sterling, said that the FSCS has interpreted the law wrong and that LCF was carrying out the regulated activity of dealing in investments in principal. They therefore argued that once MiFID II came into force, the mini-bonds issued by LCF should be classified as transferable securities under the directive.

The FSCS has already paid out more than £20m in compensation and issued 1,295 decisions after increasing the size of its team working on the case but has warned that many LCF bond-olders may be outside its compensation remit.

A date for the hearing has yet to be set.

The FSCS said earlier this year that it would also not seek to enforce any costs order against the investors bringing the judicial review. Therefore, if they lose the case the body would not seek to recover legal costs from the claimants.

If the hearing rules in their favour, mini-bond claimants with bonds issued on or after 3 January 2019 could be entitled to a payout.

A total of 11,600 investors were hit by the £236m collapse of LCF which has resulted in a wave of complaints, claims and litigation, with some accusing the FSCS  and the FCA of dragging their feet.