The Securities and Investments Board is also hoping to claw back part of the pounds 15m held by Knight Williams Portfolio Management, another company that is still trading.
The money would be used to pay about pounds 5m compensation to some 400 alleged victims of poor financial advice from the firm.
The SIB has asked a firm of accountants to look into various financial dealings within the interlocking web of Knight Williams companies.
If the regulator finds that any transactions between them were irregular and led to investors losing out, it could bar those responsible from working in the financial services industry.
Among the directors who could face a ban are Robin Knight Bruce and John Williams, who co-founded the company in 1980.
The SIB yesterday refused to comment on the investigation, which is believed to follow talks between Treasury ministers and the investors' action group earlier this month.
But one regulatory source said: "It is no secret that senior people there were very angry when Knight Williams & Co [one of the companies in the group] went into liquidation at the end of July.
"This was seen as a slap in the face both for many elderly investors hoping for compensation from KW & Co and the SIB itself, which had been trying for months to broker a deal. It wouldn't surprise me if there are people in SIB out for blood."
SIB's new investigation comes after complaints by former investors that while the company they were claiming compensation from had gone into liquidation, another in the same group has pounds 15m of assets.
It also comes in the wake of discussions with the fund managers' watchdog, Imro, of which Knight Williams Portfolio Management is a member.
Kenneth Jordan, a member of the Knight Williams Action Group, said: "I am pleased that the SIB is moving on this front. Of course, the question must be asked as to why they did not move sooner than this."