A city regulator said the spike in the share price of Royal Mail on the day of privatisation was at the "top end" of what would be expected when a firm floated but there was no need to launch an inquiry into the sale.
Financial Conduct Authority chief executive Martin Wheatley said there was nothing to suggest a failure of regulation about the way the shares were sold at a price which soared by 38% on the first day, representing an increase in value of £750 million for the new shareholders.
Public Accounts Committee chairwoman Margaret Hodge called for an inquiry into whether investment banks which advised on the sale had properly followed the rules preventing them sharing information with their asset management arms which were allocated Royal Mail shares.
Mr Wheatley told the committee that initial public offerings (IPOs) were usually priced to ensure that the shares were sold and an increase in the price was to be expected.
He said: "Most IPOs are priced to see some jump on the first day, and around the world that's a familiar model, that you see an increase. Maybe this was a bigger increase than most, but typically they are priced to go.
"In terms of inquiries, we don't routinely inquire into anything that happens on the market unless we suspect there's a particular possibility of misconduct.
"We have read the National Audit Office (NAO) report, we have seen clearly some of the observations that were made. There's nothing to us that suggests that our resources should be used on an inquiry, absent any further information coming out."
He added: "Our job is to look at whether there has been regulatory failure, and there is nothing that I have seen so far that suggests that there was a regulatory failure."
The NAO report into the controversial sale said that of the seven investment banks in the syndicate which advised the Government on the sell-off, at least five were allocated shares on behalf of their asset management arms for distribution to their clients.
Mrs Hodge said that without an investigation she could not be satisfied that the Chinese walls within the institutions had worked properly to keep the asset management and advisory roles separate.
Mr Wheatley said: "On this instance, simply the share price movement or the fact that there are a number of advisers who have asset management arms as part of their business, those two facts don't of themselves pass the threshold level for should an investigation be launched."
He added that there is "insufficient evidence for us to suggest that there is a breach".
But Mrs Hodge said: "I find it really, really hard that you as the regulator, seeing ... what I think was a very massive increase in the share price on day one, and then beyond that, you don't think that there are questions to be answered?"
She added that "I 'm not saying it was wrong" but "there's too much in there that suggests to me that you should be asking questions and therefore instituting an inquiry".
Mr Wheatley told her: "We know, the banks know, that they have to be independent, they have to be able to give their independent advice. There is nothing that we have heard which suggests that they didn't."
Ministers, including Business Secretary Vince Cable, have faced accusations of selling Royal Mail off "on the cheap" because the share price has risen far beyond the initial 330p.
Mr Wheatley told the MPs: " If you wanted to look at where the failure was, the failure was in the pricing decision, not in the regulation."
The Communication Workers Union, which is holding its annual conference in Bournemouth this week, has repeated its call for Mr Cable to resign, describing the privatisation as "botched".
Billy Hayes, the union's general secretary pledged to continue campaigning against the controversial privatisation.
He told the conference in Bournemouth that the postal group had been "flogged off on the cheap", at huge cost to the taxpayer.
"Vince Cable said the share price was froth - but on the day of the sale, £1 billion was lost on the way to the stock market. We won't forget you Cablefroth - we are coming after you, and we are going to fight for the renationalisation of Royal Mail."
MPs from the Public Accounts Committee and the Business Select Committee will hold further hearings this week on the sell-off, with Liberal Democrat Mr Cable due to give evidence tomorrow.
The business committee will also question Tory minister Michael Fallon, while the Public Accounts Committee will question bankers on Wednesday, including UBS and Goldman Sachs, which marketed the shares to city investors, and financial advisers Lazard, which advised the Government on the flotation.