The Complaints Commissioner has rejected a company's request for £2.5m in compensation from the Financial Conduct Authority after it wrongly classified the firm as unregulated.
But the commissioner said the FCA had not provided the company with enough details of what evidence it would need to provide to support their claim for compensation.
The FCA has accepted the commissioner's recommendations and agreed to provide the details.
Between September 2013 and April 2015 the FCA incorrectly listed the company - known as "Company C" - on its warnings website, meaning it was unregulated.
Company C claimed this mistake lost the firm 17 new clients over the 19-month period at a cost to the company of £2.48m and asked the FCA to repay that money.
But the FCA said Company C had not provided sufficient evidence that the mistake had indeed cost the company that much money, and offered the firm £500 - one five thousandth of what was claimed - for "distress and inconvenience".
Company C claimed this offer was "derisory" and complained to the Complaints Commissioner.
Complaints commissioner Antony Townsend broadly backed the FCA's position, stating "despite requesting evidence to demonstrate direct financial loss, Company C had not supplied sufficient evidence".
But he said the FCA should have made it clearer exactly what evidence it required, and requested the regulator to write to Company C with that information.
Mr Townsend also rejected Company C's complaint that the FCA had taken too long to rectify the mistake.
He said: "Although I appreciate your frustration with the delay you experienced, and although I consider that the complaint might have been concluded earlier, in my view length of time at each stage of their investigation was in large part due to their determination to consider an unusual issue thoroughly.
"Therefore, I am unable to uphold this element of your complaint."
Responding to the Complaint Commissioner's decision, the FCA confirmed it would write to the complainant with the requested information.
Mr Townsend pointed out it was "important to emphasise that the complaints scheme does not offer compensation of the kind or quantum sometimes awarded by the courts".
james.fernyhough@ft.com
