Investors claiming compensation from Knight Williams, the failed financial adviser, have won a meeting with Treasury ministers to press their case.
Kenneth Jordan, a representative of the investors alleging that they were badly advised by Knight Williams, will meet with Angela Knight, a Treasury minister, next week.
Mr Jordan said yesterday: "The most important point we will be making to the Minister is that the regulatory system, which was supposed to oversee the conduct of Knight Williams, has let us down badly."
The Treasury meeting is the latest stage in a long running battle between about 400 investors, mostly grouped in the Knight Williams Action Group, and the company.
Knight Williams went into liquidation a month ago, arguing that it was unable to meet the compensation costs, likely to run to millions of pounds. Arthur Andersen, the liquidators, are now considering whether to accept the investors as creditors of the failed firm. If they do not, investors will be forced to turn to the financial industry's compensation scheme, facing further months of delay.
A further pounds 15m of assets, the proceeds from the sale of the funds it managed, are now in a subsidiary Knight Williams company, which is still trading.
Knight Williams, which was set up in 1980, targeted mainly elderly investors, describing itself as a `retirement specialist'. Up to three years ago, the firm managed more than pounds 400m on behalf of about 25,000 clients.
But many investors subsequently claimed that they were not made fully aware of the risks involved in equity investments. They also alleged that Knight Williams salesmen advised them to place their money in the company's own funds, which had far higher charges than usual. When they complained to Fimbra, the financial advisers' former regulator, their cases were mostly rejected. Knight Williams denied the allegations, arguing that the fall in the value of investments was caused by the collapse in stockmarkets worldwide following Iraq's invasion of Kuwait.
The company also claimed that its high charges were caused by the fact that it provided a total service to clients rather than simply placing their funds with an outside manager.
Despite these arguments, the company was fined pounds 50,000 by Fimbra in September last year, after admitting several charges of poor record-keeping. Knight Williams also agreed to review all the cases where investors were seeking compensation.