The U.S. Securities and Exchange Commission has started an inquiry into the blank check company frenzy that’s gripping Wall Street and is seeking information on how underwriters are managing the risks involved, Reuters reported.

The regulator has in recent days sent letters to Wall Street banks on their dealings with special purpose acquisition companies, the news agency reported, citing four unidentified people with direct knowledge of the matter. The inquiry is asking for voluntary information and isn’t at the level of a formal investigation, Reuters said.

The SEC is seeking information on deal fees, volumes and internal controls to police deals and asking questions on compliance and reporting, according to Reuters. Concerns may center around due diligence and the heightened risk of insider trading when a SPAC goes public and when it announces an acquisition target, the report said.

Press officials at the SEC didn’t immediately respond to a Bloomberg email seeking a comment sent outside of normal business hours.

Deals in SPACs have sparked a frenzy on Wall Street and beyond. In the past 12 months, more than 700 SPACs-- mostly backed by billionaires, business titans, private equity, venture capital and even corporations -- have flocked to New York exchanges, seeking to raise about US$227 billion, according to data compiled by Bloomberg.

U.S. regulators have been growing concerned about the risks posed to investors from the unprecedented bubble. The regulator recently warned against buying stakes in SPACs based solely on endorsements from Hollywood actors, professional athletes and other celebrities, without singling anyone out specifically.

“Lately, we have seen more and more evidence on the risk side of the equation for SPACs as we see studies showing that their performance for most investors doesn’t match the hype,” Acting Securities and Exchange Commission Chair Allison Herren Lee said earlier this month.

SPACs are publicly traded shell companies with no revenue that raise money from investors with the goal of buying a profitable business. A top worry is that as more and more SPACs sell shares, there will be few viable companies available for them to acquire, leaving investors holding the bag.

--With assistance from Ben Bain.