The FSA is to look into charges levied by UK fund management groups after its head of investments policy queried why they had been rising in recent years.
Peter Smith told Bloomberg he found it hard to understand why fees from UK fund managers were so high.
"In what is allegedly a competitive industry - the UK funds market - how is it that the average cost of funds has risen over the years rather than fallen?" he told Bloomberg.
"That's something we're going to be thinking about."
The attack on the fund management industry comes at a time when fees are already in the spotlight, with the implementation of RDR just around the corner.
A number of groups - including Schroders and Fidelity - have already moved to offer low-cost products alongside existing mandates.
The total expense ratios (TERs) on UK funds have faced criticism for being higher than those charged by funds in the US.
Research from 2009 by the Review of Financial Studies found the average British mutual fund charged 2.21% annually, compared with 1.04% in the U.S.
The picture now is far from clear however. Recent moves by fund groups to cut costs by launching new funds, or introduce low-cost share classes across fund ranges, will have had an impact on costs overall.
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From 1 March