The regulator was replying to comments made by Ms Morgan who had asked for an explanation as to why the FCA intention to launch an independent investigation “required Treasury’s help” to commission.

FCA chair Charles Randell refuted that claim and said the involvement of the Treasury was needed to satisfy certain procedural requirements.

In his letter to the MP he wrote: “I do not believe that this is the correct interpretation of the position, and so given the public interest in this issue and to avoid any further confusion I thought it would be helpful if I wrote now setting out more fully the rationale for the board’s decision.

“At its meeting on 28 March 2019, the board considered the progress of the factual investigations in relation to LC&F, the question of the sale of mini-bonds more generally and the scope of the two sections under which a statutory review could be commissioned.

“While section 73 only concerns events which have occurred in relation to a regulated person, section 77 is more suited for a broader investigation in the public interest which addresses the activities of both authorised and unauthorised persons.”

He went on to say that confusion over the application of regulatory powers meant the FCA “should immediately invite the Treasury to direct the FCA to commission a review into the regulation of mini-bonds and the failure of LC&F under section 77 on grounds of the public interest”.

LCF slumped into administration in January with 14,000 bondholders with holdings totalling £236m.

Last month the Serious Fraud Office revealed there had been four arrests in connection with the firm’s collapse.