The Financial Conduct Authority (FCA) has proposed new requirements for selling mutual society shares to ordinary retail investors.
Firms selling these investments will need to ensure the investor has read specified risk warnings and committed not to invest more than 5% of their net assets.
The new requirements apply only to sales to retail investors who have not been certified as sophisticated or high net worth.
The FCA is also consulting on plans to make permanent the temporary rules announced in August 2014 which placed restrictions on the distribution of contingent convertible securities (CoCoS) to high net worth or sophisticated investors, and professional and institutional investors.
The consultation will be open until 29 January 2015.
Mutual societies are permitted to issue new types of share instruments to strengthen their capital base, raising capital options for mutuals often being limited, which carry risks consumers may not be familiar with.
There is no guaranteed dividend from a mutual society, selling the shares is more difficult and investors may not be able to sell when they want to or only be able to sell them at a reduced price.
There is also the risk of partial or complete loss if the insurer gets into financial difficulties.
Christopher Woolard, director of policy, risk and research at the FCA, said: "One of our objectives is to ensure that consumers have the right degree of protection. That is why the new rules we are proposing will make sure that there are appropriate safeguards in place so these complex instruments are offered only to investors who are able to make informed decisions about them."
