The City watchdog has met the heads of finance firms to discuss a group compensation deal for investors in split-capital investment trusts.
Some investors lost their life savings
Splits were marketed as a low-risk way to benefit from rising share prices.
But when the stock market collapsed, the products left thousands of investors out of pocket.
The heads of 21 firms attended the meeting and discussed compensation for investors and possible impending disciplinary action.
The Financial Services Authority (FSA) has been investigating whether investors were misled about the risks posed by split-capital investment trusts.
The FSA's 60 strong investigation team has also been looking into whether fund managers colluded in a so-called "magic circle", in the hope of propping up one another's share prices.
At Tuesday's meeting John Tiner, FSA chief executive, presented firms with 780 files of evidence detailing 27,000 taped conversations and over 70 interviews.
Mr Tiner then invited firms to take part in collective settlement negotiations aimed at ensuring compensation for investors.
The negotiations will also decide what disciplinary action firms should face, although individuals found guilty of wrong doing will be dealt with separately.
The FSA said that firms have until the 16 March to decide whether or not they are prepared to join the settlement process.
Firms were told not to comment to the press in advance of the deadline.
In 2003 the Treasury Select Committee of MPs described the people who sold split-caps as no better than "sophisticated snake-oil salesmen".
Its report into the debacle called for some investors to receive compensation.
And the report "deplored" that investors were not adequately warned of the dangers of investing in splits.
Under current rules, the FSA oversees the Listings Authority, which oversees the approval of prospectuses and some marketing material.
Investment trusts themselves are regulated by company law.