The FSCS said it had reviewed the situation and because the investment vehicles through which Harlequin property investments were sold were likely to be Unregulated Collective Investment Schemes (Ucis), claims for bad investment advice would fall under its remit.
The FSCS is already paying for negligent mortgage advice and pension switching, where the underlying investment was Harlequin.
Thousands of mostly British pensioners invested around £400m ($486.3m, €455.6m) in the unregulated scheme via UK financial advisers.
10% ‘guaranteed returns’
Harlequin offered guaranteed returns of 10% from investing in luxury Caribbean villas. Financial advisers who sold the scheme were said to have been paid commissions of up to 15%.
The Harlequin scheme was declared bankrupt by the High Court in St Vincent and Grenadines earlier this year, meaning its remaining assets were transferred to a bankruptcy trustee.
Harlequin claimed the majority of its investors opposed the bankruptcy, though it was unsuccessful in an appeal against the court’s bankruptcy decision.