The FSA has announced a general disclosure regime for long CfD (contracts for difference) positions.
This will be the most effective way of addressing concerns in relation to voting rights and corporate influence, the regulator says.
CfDs allow holders to make money on share price moves without buying shares. They can be used to take both short and long positions on share prices and holders are entitled to any dividends paid by the underlying company during the life of the CfD.
The new disclosure regime will require that existing share and CfD holdings, in the same company, should be aggregated for disclosure purposes. The disclosure threshold will be at 3%, in line with the existing disclosure rules, the FSA says.
It intends to develop an exemption for CfD writers, who act as intermediaries, similar to the Takeover Panel’s Recognised Intermediary exemption to reduce unnecessary disclosures.
The announcement comes following extensive feedback from a broad range of interested parties on the FSA’s November 2007 CfDs Consultation Paper.
The FSA will publish a Policy Statement in September 2008 with a Feedback Statement on responses to this consultation, along with the draft rules.
Although the position has now been finalised, the FSA will accept technical comments on the rules to ensure they are workable. Final regulations will be issued in February 2009.
Alexander Justham, FSA director of markets, says: " We have received extensive feedback on this issue and we recognise that views differ widely across the market. Taking this into account we have devised a solution that meets the concerns and issues raised.”
Daniel Godfrey, director general Association of Investment Companies, comments: ”We are delighted that the FSA has opted for broad disclosure of CfDs. Holders of CfDs have been able to secure stakes and voting powers in companies ‘at arms length’ without the knowledge of other shareholders and the management of those companies. CfD disclosure will support investor confidence in the quality of UK markets and governance standards."
The Contracts for Difference Policy Update can be viewed on the FSA website.
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