The Financial Conduct Authority has warned about high-risk innovative finance Isas (Ifisas) being advertised alongside cash Isas.
In a statement published on its website the regulator confirmed it had seen evidence the two products were being promoted together, and it warned investments held in Ifisas were "high-risk", with the money ultimately being invested in products such as mini-bonds or peer-to-peer investments.
The City watchdog warned these types of investments might not be covered by the Financial Services Compensation Scheme and investors might therefore struggle to reclaim any money lost.
The FCA warned: "Anyone considering investing in an Ifisa should carefully consider where their money is being invested before purchasing an Ifisa."
Innovative finance Isas were introduced by former chancellor George Osborne in his 2015 Summer Budget to help investment in small businesses and to allow investors to hold P2P assets in a tax-free wrapper.
But they have not taken off in the same way as the lifetime Isa, which Mr Osborne announced in 2016 to help younger savers put money aside for a house deposit and retirement.
During 2017/18 only 31,000 Ifisas were subscribed to, compared to 166,000 Lisas, 2.8m stocks and shares Isas and 7.8m cash Isas.
Earlier this year mini-bond provider London Capital & Finance collapsed putting the funds of more than 14,000 bondholders at risk.
Because mini-bonds are unregulated investments the FSCS confirmed it would not accept any claims from LCF investors, with the company's administrators instead hoping to recover funds on behalf of those affected.
In the most recent update from administrators Smith & Williamson, they estimated bondholders would see as little as 20 per cent of their investments returned to them.
An investigation into LCF by the Serious Fraud Office remains ongoing.