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OFT to launch investigation into investment bank IPO underwriting

An investigation into the prices UK investment banks charge for equity underwriting and other associated services is to be launched by the Office for Fair Trading (OFT).

According to the authority, many corporate users of these banking services have been unhappy with the standard of service offered by financial institutions.

The proposed study is expected to take place during the summer of 2010 and will focus on how underwriting, including advice and arrangements, are sold.

Clive Maxwell, OFT senior director of services, said: “Economic growth and productivity rely on companies being able to raise capital efficiently for investment.

“We plan to study the efficiency of the equity underwriting market and identify any areas for improvement. Our study will also help us to advise the government in its wider thinking about wholesale financial markets.”

The research will analyse rights issues from the top 350 public companies in the UK to discern whether the expressed concerns are justified.

Figures quoted by the OFT showed that corporate businesses paid up to £2 billion in fees for equity underwriting services during 2009.

The OFT explained that firms raised up to £70 billion in equity capital last year.

By Jim Ottewill