The UK's financial regulator "should have been awake" to problems at Neil Woodford's investment fund, according to former City Minister Lord Myners.
He told the BBC the Financial Conduct Authority had missed "clear warning signs" that things were going badly.
Mr Woodford, one of the UK's best-known stockpickers, suspended his largest fund this week after rising numbers of investors asked for their money back.
The FCA has said it is "aware of the situation".
The regulator said: "The FCA is notified of decisions to suspend funds; it does not approve them."
On Monday, Mr Woodford stopped people from taking their money out of the Woodford Equity Income Fund.
He said the move was "necessary to protect investors' interests" after they withdrew about £560m from the fund over four weeks.
On Thursday, the chair of the Treasury Committee, Nicky Morgan, said investors in the Woodford Equity Income Fund should not be charged management fees while trading in the fund is suspended.
Lord Myners, who was City Minister during the global financial crisis, told the BBC's Today programme that 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".
He also highlighted the role of Link Fund Solutions, the supervisor to the Woodford Equity Income Fund, which had been appointed by Mr Woodford himself.
Lord Myners said that the fund management industry in the UK "argued against having independent directors so there is nobody watching the fund managers saying 'wait a minute, this is getting too risky'."
Link Fund Solutions said: "Link Fund Solutions acts in full accordance with its legal and regulatory obligations, including maintaining its strictly independent stance."