The group refers to the FCA as “incompetent”, insisting that it too often fails to perform its oversight functions properly and they are demanding the regulator be overhauled.

The report conducted by the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services, comprises 30 MPs and 14 members of the House of Lords.

It specifically criticised the FCA for failing to properly investigate and act on information provided by whistleblowers and insisted the transformation programme that the regulator had committed to had “not worked”.

A lack of transparency was highlighted and the all-party group questioned whether the regulator in its current structure with evidence presented of a “defective culture” and “errors and inaction” could ever be fit for purpose.

The all-party group has suggested a string of reforms to be made to the FCA; this includes introducing a no tolerance policy for a lack of integrity; setting up a supervisory council to review the FCA’s effectiveness; changing how the FCA is funded and overhauling the way the FCA’s senior leadership team is appointed.

These reforms will require legislation.

Just prior to the report, the FCA told the Financial Times it had learned from historic issues and transformed as an organisation so it could deliver for consumers, the market and the wider economy.

City St George’s University of London Banking at Bayes Business School senior lecturer Francesc Rodriguez Tous says: “It’s important that powerful regulators such as the FCA — but also the Bank of England — are open to this sort of scrutiny. It’s striking how bold and critical the parliamentarians are.

“The FCA is a relatively young organisation so it’s not surprising that outsiders will identify a lot of room for improvement.

“The government and the regulators themselves should look at opening up these institutions to research by UK-based academics so they can identify strengths and weaknesses of the regulatory framework. That would also help transfer knowledge between the regulator and sector leaders.”

Last month, the FCA highlighted a report which indicated that over three-quarters of the firms it regulates  have “a high level of satisfaction” with its performance over the last year.