The FSA will review its investigation and enforcement procedures following criticism from the Financial Services & Markets Tribunal.
In its ruling in the recent Legal and General (L&G) endowment mis-selling case, the Tribunal severely criticised the FSA's regulatory decisions committee (RDC). The RDC, it said, had made a "significant error" in relying on a report issued by PricewaterhouseCoopers (PWC).
Experts have also criticised the role of the RDC and its relationship with the FSA. Reynolds Porter Chamberlain senior solicitor Harriet Quiney said the L&G case had shown how the relationship between the committee and the FSA could create a breeding ground for "suspicion and mistrust".
"The problem comes when the RDC relies too heavily on the FSA for its evidence. A firm has no direct access to the RDC, and then - in my experience - evidence can become inaccurate," she said.
Earlier this month the tribunal decided to reduce the £1.1m fine it slapped on Legal & General for mis-selling mortgage endowments.
The RDC had not scrutinised the claims thoroughly before hauling L&G over the coals, it said.
Quiney pointed out that in L&G's case, the PWC report was misinterpreted to make L&G appear guilty of the charges in a large proportion of cases. In fact, she said, the sample was a minority of 250 policies.