A probe into the City watchdog’s handling of an investment company which trapped £237 million belonging to small investors has been postponed for the second time.

Dame Elizabeth Gloster, who is leading the investigation into the Financial Conduct Authority (FCA), said her team would need almost two more months after the watchdog delayed in handing over papers.

In mid-July the FCA handed over 3,500 documents about the investment scheme, London Capital & Finance (LCF), “which should have been provided previously”.

Experts on Dame Elizabeth’s team were then forced to comb through the documents, taking time out of their schedule.

This in turn affected Dame Elizabeth’s ability to interview senior FCA staff, and the Covid-19 pandemic has further delayed the probe, she said.

I consider it vital for all concerned that my report is thorough and robust, and takes into account all the relevant issues

“I am very conscious that many individuals who invested in LCF have been impacted both personally and financially by LCF’s insolvency and will understandably be disappointed by the further delay in the delivery of my report,” she said.

“However, as I have said previously, I consider it vital for all concerned that my report is thorough and robust, and takes into account all the relevant issues.

“I have asked the FCA to take any necessary steps to ensure my investigation is completed as soon as possible so that I can share my report with them for submission to HM Treasury by the revised date.”

Dame Elizabeth’s team was originally meant to report by July 10, but in June she delayed this until September 30. She has now said it will take until November 23.

In a letter to Dame Elizabeth, FCA chairman Charles Randell said “legacy technology” which is getting a multimillion-pound upgrade was in part to blame for the delay in handing over documents.

“I would again like to apologise for the delays in the provision of information in response to your requests and the matters highlighted in recent correspondence which have contributed to this delay in the completion of your investigation,” he said.

“We have previously highlighted the matters that have contributed to this delay, including the impact of urgent coronavirus response work on senior leaders’ availability.”

Around £237 million was trapped in London Capital & Finance when it went into administration in January 2019.

Investors were mainly small-time pension savers who were attracted by the high returns that LCF offered.

The Financial Services Compensation Scheme (FSCS) originally said it did not cover the LCF investments as they were not regulated.

However it later found that investors could qualify for a payout if the products had been misadvertised.

Around £13.5 million had been returned to 844 investors as of July 30, the FSCS said.