ISC rights issue inquiry to focus on demand side
THE INSTITUTIONAL Shareholders Committee (ISC) has launched a consultation for its formal inquiry into rights issue fees, which it said would be complementary to a similar investigation announced by the Office of Fair Trading (OFT) last month.
The ISC’s inquiry, spearheaded by Doug Ferrans, said its own inquiry would focus on the demand for investment banking services by listed companies in which its members invest. A demand-based approach would avoid doubling up with the OFT’s study, which will concentrate on the supply of such services by the investment banks, which have been accused by some of operating a cartel-like structure in order to set a higher bar for rights issue fees.
The average fee demanded by banks for running a rights issue has risen to around 3.5 per cent from just two per cent a decade ago, according to research from the Association of British Insurers.
Ferrans said the ISC will look closely at the governance environment in which companies decide to use the services of the investment banks.
It aims to present initial conclusions in the autumn and produce a final report by the end of the year.