Lord Myners, former City Minister during the global financial crisis, has accused the FCA of missing "clear warning signs" regarding Woodford's Equity Income fund, which suspended dealing earlier this week.
Myners told the BBC the regulator "should have been awake" to issues regarding the fund.
He said: "[The FCA were] like the people in white suits on Line of Duty - the scene of crime inspectors who arrive after the damage has been done and did not anticipate what was happening, even though there were clear warning signs at Woodford that things were going badly."
The FCA has confirmed it is "in discussions" with Woodford Investment Management's authorised corporate director Link Fund Solutions and Guernsey's stock exchange over the firm's decision to list illiquid holdings there.
Yesterday (6 June) Chair of the Treasury Committee Nicky Morgan called for Woodford Investment Management to waive the fees on Woodford Equity Income while the fund is suspended.
Morgan stepped into the furore following the suspension of the fund on Monday following reports that manager Neil Woodford is continuing to take management fees amounting to £100,000 a day.
Hargreaves Lansdown announced on Tuesday (5 June) it has dropped its platform fee on the Woodford Equity Income fund while dealing is suspended with immediate effect.
"Investors in the Woodford fund have been locked out of accessing their cash. Yet it has been reported that Mr Woodford is taking in nearly £100,000 in management fees a day," Morgan said.
"The suspension of trading has provided Mr Woodford with some breathing room to fix his fund; he should afford his investors the same space and waive the fund's fees while the fund is suspended.
Morgan added: "The FCA has rightly said that it is closely watching the fund. The Treasury Committee will no doubt raise this troubling episode, and what lessons can be learnt, when we take evidence from the FCA and Bank of England."