The Treasury has given further details on its enquiry into the collapse of mini bond provider London Capital and Finance (LCF).
The Treasury has now confirmed that Elizabeth Gloster will lead the enquiry. Dame Elizabeth is a former High Court Judge.
It has also stated the work will examine the broader space of mini bonds and other illiquid assets to get an understanding of how these products work and whether regulation has failed in this space.
It will look at the actions, policies and approach of the FCA to its supervision of LCF.
Alongside this investigation, the government will review the wider policy questions raised by the case.
This will include research into the wider market for non-transferable securities, such as mini bonds, and their role in the economy.
City minister John Glen said: "The government is committed to creating a stronger and safer financial system.
"The independent investigation into the supervision of LCF will ensure that the events and circumstances surrounding the collapse of LCF are better understood.
"Its findings will help to properly protect those who invest their money in the future."
The investigation is expected to run for 12 months.
London Capital & Finance went into administration in January owing more than £230m and putting the funds of some 14,000 bondholders at risk.
The firm provided mini bonds to retail investors. Mini bonds are unlisted loans to other companies, with the interest paid to the end investor.
As a provider of unregulated investments London Capital & Finance did not need to be authorised by the FCA to issue the bonds, but it was authorised to promote the products.
The Serious Fraud Office is investigating what has been described as "highly suspicious transactions" at London Capital & Finance, with four individuals associated with its collapse arrested in March and since released pending further investigation.
In March, the FCA’s chairman Charles Randall, wrote to Mr Glen to inform him that an enquiry should take place.
The Financial Conduct Authority confirmed in April that it will also commission an independent investigation into London Capital & Finance, including a review of the regulator's own supervision of the collapsed mini bond provider.
A cross-party group of MPs had raised concerns over 'evidence' suggesting the FCA was alerted to the activities of the mini bond provider in November 2015, but was still providing the company with an FCA-regulated accreditation for the promotion of their activities in June 2016.
The MPs called for the resignation of Andrew Bailey, chief executive of the Financial Conduct Authority over the matter.
Nicky Morgan, chairwoman of the Treasury committee, warned the investigation "cannot be kicked into the long grass".
She said: "Following calls from the Treasury Committee for the FCA to launch an investigation into events surrounding the failure of LC&F, HM Treasury’s decision to direct the FCA to commission an independent investigation was welcome.