* FCA says failure one of pricing, not regulatory
* Ministers, banks face lawmakers again this week
* Royal Mail shares still 55 pct above offer price (Adds quotes, details)
LONDON, April 28 (Reuters) - Britain's financial regulator will not investigate the government's sale of Royal Mail , it said on Monday, rejecting calls from lawmakers who said a sharp rise in the firm's share price should have set alarm bells ringing.
Last October, Britain sold 60 percent of the postal firm at 330 pence per share, ending 500 years of state control and raising 2 billion pounds ($3.36 billion) for the public purse.
Its share price has since risen by as much as 87 percent, offering quick profits for big banks and City investors and drawing heavy criticism from trade unions and the opposition Labour Party who say the government botched the deal.
"It may well have been disappointing for the issuer to have found that those shares were subsequently sold very quickly, (but) that's not a regulatory issue, there was no misconduct, no suggestion of breach," Martin Wheatley, Financial Conduct Authority (FCA) chief executive, told parliament's Public Accounts Committee.
Wheatley rejected criticism from committee members who said the allocation of shares to asset managers at the same banks who advised the government, coupled with the sharp rise in the share price after the sale, should have triggered an FCA inquiry.
"Those two facts don't of themselves pass the threshold level for should an investigation be launched," Wheatley said. "If you wanted to look at where the failure was, the failure was in the pricing decision, not in the regulation."
A National Audit Office report earlier this month said taxpayers had been short-changed by at least 750 million pounds, prompting lawmakers to haul officials before them once more this week for questioning over whether it was undersold.
The sell-off, which followed three failed attempts to privatise Royal Mail in 20 years, came in the face of possible strike action at the postal firm that the government had said could deter investors and contributed to its cautious approach on price.
Ministers have said they were cautious to reduce the risk to taxpayers of the sale being a flop.
As well as the FCA, ministers responsible for the sale will again be quizzed on Tuesday alongside their financial advisor Lazard. Lazard will then join bankers from UBS and Goldman Sachs, the two banks that led the sale, in front of lawmakers on Wednesday.
Royal Mail's shares closed at 511.5 pence on Monday, still 55 percent above its offer price, valuing the business at just over 5 billion pounds.
($1 = 0.5948 British pounds) (Editing by Angus MacSwan and Pravin Char)