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(Adds comment from the Investment Management Association.) By Vladimir Guevarra and Digby Larner Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The U.K.'s Office of Fair Trading put investment banks in its sights Thursday, saying it will launch an inquiry into how much they charge for equity underwriting and other services in a long-awaited move that could lead to fee cuts. The OFT said close to GBP70 billion in equity capital was raised by companies in the U.K. last year and that investment banks charged an estimated GBP2 billion in underwriting and other associated fees. The OFT said initial talks showed some corporate clients were dissatisfied with the services they received. It plans starting a market study this summer looking at rights issues and other types of equity raising by the 350 largest U.K. public companies, to consider whether client concerns are justified. The inquiry will look at all foreign and local investment banks operating in the U.K. Although the inquiry will be launched later this summer, the OFT hasn't given a completion date yet. The OFT said it would accept written views on the issue until July 9. Investment banking activities worldwide have been under scrutiny since the financial crisis. The OFT will look at how underwriting and related services are provided, including the level of competition and the way different services such as advice, arranging rights issues and underwriting are sold. It also plans to look at how underwriting services are purchased, including what information is made available to buyers and the incentives on them, as well as how they are regulated. It said it will sound out the market to see how far reaching the inquiry should be, such as whether to include aspects of capital raising by companies whose securities are traded on the Alternative Investment Market or initial public offerings. Seymour Pierce analyst Bruce Packard said: "It's pretty clear that the regulator is looking a lot more closely at how the pricing structure works. "People feel that the deep discounts [in rights issues] and the large fees seem a bit iniquitous... The timing [of the study] looks reasonably good, from the regulator's perspective anyway," Packard said. The British Bankers' Association said it will help the OFT in its study. "Investment banking is an essential service for U.K. industry and a major contributor to the economy. The investment banking sector will assist the OFT in its research to ensure it continues to play its key role in financing business both in Britain and overseas," a BBA spokesman said. The OFT's plan comes after the Institutional Investor Council, a trade body for institutional investors, separately launched its own investigation on rights-issue fees last month. The council appointed Douglas Ferrans, chairman of the Investment Management Association, to lead its study. The IMA is the trade body for the U.K.'s GBP3.4 trillion asset management industry. Ferrans said: "As shareholders and responsible owners of major U.K. companies, institutional investors are particularly interested in the demand side for investment banking services by listed companies. Our inquiry will therefore overlap, but be complementary to, the OFT's study of their supply." In March, OFT Chairman Philip Collins gave a sense of the types of questions he said needed to be asked regarding investment banks. Collins said in a lecture at the Cass Business School that the OFT's interest "is in whether City markets are delivering what business consumers want on competitive terms." "In some markets, fees and margins are reported to have risen significantly, while the risk-reward ratios and responsibilities are said to have changed. If this is the case, why is it happening and why are competitive pressures not constraining increases as well as attracting new entrants? "How far are consumers bargaining with providers? If they are not doing so effectively, why is this the case? "There are market practices and understandings about 'who does what' and about fee levels. Do these contribute to making markets work well, allocate responsibilities and risks appropriately and benefit consumers? Or do the benefits just flow to the providers, limiting choice and driving up costs to users, and misallocating rewards and risks?" Collins said. The inquiry will draw on discussions with investment banks and other providers of equity underwriting services, large corporate businesses, the government and trade bodies, the OFT said. It also said the study won't cover debt-raising activities and advice for mergers and acquisitions "although this may be relevant in some cases." In March, the Association of British Insurers called on the U.K. government to look into affecting more transparency on the fees being paid to investment banks when advising on M&A activities. -By Digby Larner, Dow Jones Newswires; +33 1 4017 1748; digby.larner@dowjones.com (END) Dow Jones Newswires June 10, 2010 10:34 ET (14:34 GMT)