City fees are too high, says Byers

THE CITY overcharges quoted companies for raising capital on the equity markets, Stephen Byers, the Secretary of State for Trade and Industry, has concluded.

Mr Byers - who yesterday published the Monopolies and Mergers Commission report on share underwriting - said there was evidence of a complex monopoly in sub-underwriting, the process via which lead underwriters pass on their risk to other investors.

This had been found by the MMC to operate against the public interest, Mr Byers said. In particular, the practice of charging standard fees for sub-underwriting resulted in "issuing companies being charged higher fees than otherwise".

However, he decided against implementing more draconian measures - such as capping fees - suggested as potential remedies by the MMC in its interim findings last summer.

Instead, Mr Byers will implement MMC proposals aimed at improving advice given by the City to quoted companies and at making companies more accountable to their shareholders.

To the relief of City institutions, Mr Byers did not announce plans to tamper with pre-emption rights - the rights of existing shareholders to have first refusal on any new issues.

The MMC also found evidence of a complex monopoly in lead underwriting, but concluded that it did not operate against the public interest.