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Sunday 13th of June 2010

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June 10, 2010

OFT to investigate rights issue fees

by Gill Montia

Story link: OFT to investigate rights issue fees

The Office of Fair Trading (OFT) has today announced plans for a market study into equity underwriting and associated services.

In 2009, companies raised an estimated £70 billion of equity capital in the UK through rights issues and the like, paying around £2 billion in fees.

However, the OFT says it is aware of some “dissatisfaction” among service users and is therefore proposing to take a look at rights issues and other types of equity-raising by the 350 largest UK public companies.

The watchdog intends to assess the following:

How underwriting and related services are provided, including the level of competition for the work and how these different services such as advice, arranging the issue and the actual underwriting are sold.

How underwriting services are purchased, including the information available to buyers and the incentives on them.

How the regulatory environment affects the provision of these services.

Discussions will be held with investment banks, other providers of equity underwriting services, large corporate businesses, the Government and trade bodies.

Earlier this year, Vince Cable, now Business Secretary in the coalition government, suggested that a “magic circle” of City firms have been stifling competition in the equity raising and mergers and acquisitions markets, by shutting their rivals out of the biggest deals.


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