"I know that some officers from the security services in Northern Ireland did know and actually reprimanded intelligence officers from raising the matter and also told them they were to desist from any further investigation," he told the BBC's Sunday Sequence programme.
Mr Wallace said two previous inquiries which looked at Kincora - the Terry Inquiry and the Hughes Inquiry - did not examine evidence relating to the intelligence services.
"My evidence, and the evidence of other people, was ruled out, because those inquiries quite clearly, and indeed, we know now specifically and deliberately, ruled out the role of the intelligence services," he said.
"The evidence that I was willing to give to previous inquiries, from the Official Secrets point of view I couldn't do that because that was not within the terms of those inquiries.
"If there is going to be any way of moving this forward, the government - and David Cameron has said no stone will be unturned - must make sure that any information, held anywhere by any agency will be made available.
"But of course the problem is, I know from my own personal experience, that those files have long since disappeared."