Clive Cowdery, the insurance entrepreneur who founded Resolution, is being investigated by the Financial Services Authority over the £5 billion sale of his closed life funds consolidator to Hugh Osmond, the pubs-to-pizza tycoon.

Mr Cowdery, who made an estimated £145 million from the sale, is one of five former directors being investigated by the City regulator in connection with the hotly contested acquisition.

Resolution plc was sold in December 2007 to Pearl Group, Mr Osmond's rival life funds investment vehicle, for £4.9 billion. Although the deal was agreed that December, it faced delays gaining approval and was not completed until the following May.

The value of Resolution's insurance assets, now under the Pearl umbrella, has since plummeted.

Mike Biggs, Resolution's former chief executive, and Jim Newman, its finance director, are also being investigated by the FSA, along with Ian Maidens, the head of mergers and acquisitions, and Brendan Meehan, a fellow company director.

Resolution would say yesterday only that the FSA was investigating “certain actions” undertaken by the five directors between October 2007 and May 2008.

Neither it nor the regulator would comment on the details of the inquiry, which is expected to be wrapped up within the next few weeks.

Resolution, in a statement that had been approved by the regulator, said: “All parties understand the FSA's requirement to investigate and the directors are all committed to assisting the FSA with a view to bringing this matter to a swift conclusion.”

The investigation, which is the FSA's second inquiry into the takeover, marks a setback for Mr Cowdery, who used a £500,000 bank loan to turn Resolution into a FTSE 100 blue-chip player during a four-year acquisitions spree.

As the owner of the Resolution brand, Mr Cowdery started work on a new venture as soon as the takeover was completed. He reinvented Resolution as a consolidator of financial services companies across Europe, eyeing targets worth up to £5 billion. Resolution Limited, a Guernsey-based company, was floated on the London Stock Exchange in December.

It had been expected to move to acquire fresh assets once the reporting season for UK insurance companies ends this month. Shares in insurance companies have been under pressure amid concern about their financial strength.

However, Resolution admitted yesterday that it would not be able to complete any takeovers until the FSA had finished its investigations.

Yesterday's revelation could prove embarrassing for John Tiner, the former chief executive of the FSA, who works for Mr Cowdery. Mr Tiner was recruited last August to run Resolution Operations, an unlisted part of the company. He had worked for the FSA for just over five years from 2001 until 2007 and was the chief executive of the regulator from 2003 until his departure. He is not subject to the inquiry.

The regulator dropped its first inquiry into the Resolution takeover last year without taking further action.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive