The Financial Conduct Authority has been accused by the chairman of the £4bn Foreign & Colonial investment trust of creating the climate for a potential mis-selling scandal.
Simon Fraser, who is also chairman of the £686m Merchants investment trust and a former non-executive director of Barclays Bank, said the way the regulator had interpreted European Union's Packaged Retail and Insurance-based Investment Products (Priips) Regulation could result in savers wrongly investing in funds.
Under the Priip regulations, since 1 January 2018 investment trusts have had to provide investors with a key information document (Kid), a two-sided information sheet with all the key facts and figures about a fund.
The document will have a standard layout with sections describing what the fund does, the investment risk, charges and performance.
But one part of the rules state the key investor information document for investment trusts must also project forward their anticipated future returns.
Mr Fraser, who also spent 27 years at Fidelity - latterly as chief investment officer - said the FCA's refusal to allow caveats to this this requirement "had created the potential for a mis-selling scandal".
He said: "I was brought up on the notion we tell people past performance does not guarantee future returns, but it seems we now have to say it does."
Mr Fraser said the FCA has enforced the key information document rules differently to other European countries, by being less flexible than regulators in other jurisdictions.
He said he asked the FCA if he could put a cover letter into the Kid to clarify the future performance projections, but said he was told he could not do this.
"The FCA have been on this, on the implementation of [Priips], in a way that [regulators in] other countries have not. In other countries they have said firms don't need to do it this way, but we have to."
FCA policy is that it accepts that in addition to the KiD, firms may need or choose to disclose other information. But the additional information must not "contradict or diminish" the significance of information in the Kid document.
Ian Sayers, director general of the Association of Investment Companies (AIC), a trade body for investment trusts, said the key information document requirements were well intentioned but echoed concerns they could have unintended consequences.
He said: "The gestation period for these rules has coincided with a strong and consistent bull market.
"This means that the mandatory performance figures will, in some cases, be suggesting too favourable a view of likely future performance. Secondly, the single-figure risk indicator will potentially be understating the risks."
He said he must be one of the few heads of a trade association anywhere to be "inundated by complaints from his members that a regulator is forcing them to overstate their performance and understate their risks".
Unit trusts also have to produce key investor information documents, but at the moment there is no requirement to project future returns. However that requirement is set to be brought in for them as well in two years time.