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The issue is caused by a difference in compatability levels assigned to the databases processing the request. A difference in these levels can cause issues with query execution.
Ensure the Compatability level for tempdb, EnterpriseVaultDirectory and the vault store databases are set to the same level.
For instance, if tempdb is set to SQL Server 2017 (140) and the vault store database is set to SQL Server 2012 (110) the query to lookup folders will not run efficiently. Update the Enterprise Vault databases to be the higher level of 140 and rerun the FSAUtility command.
The Compatability level setting can be found on the Properties of the database under Options in Microsoft SQL Server Management Studio.
Note: This issue occurs if the master database is set to the lower compatibility level. Update this setting to allow newly created EV databases to be at the correct level.