The failed Connaught Series 1 Fund invested £106m with the bridging lender which entered administration in September 2012.
And Linda Woodall, director of mortgages and consumer lending at the FCA said the regulator was focused on securing a fair redress for investors.
She said: “At this stage, we believe that a negotiated settlement to address investor losses from the Connaught Series 1 Fund represents the best course of action for all parties.
“Therefore, for a limited period, we will support the parties concerned in an attempt to reach a negotiated resolution with a view to obtaining appropriate redress for investors as soon as possible.
“We encourage the parties concerned to engage constructively with us and each other for this limited period to avoid potentially lengthy and costly alternatives to a negotiated settlement.
“This is a voluntary and confidential process, and so we will be unable to comment further on its progress until an agreement is reached or negotiations break down.”
Woodall made her comments to the All Party Parliamentary Group on Connaught Income Funds.
