The FSA has today published a consultation paper to propose greater disclosure of the economic interests in a company's shares held through derivatives, such as Contracts for Difference (CfDs).
A CfD is a contract between two parties where a buyer can recieve the difference between a company's share value at expiry and the value at the time of the contract from the seller. A CfD holder has an economic interest in a company, despite not directly owning its shares. The paper outlines how potential market failures could occur from using undisclosed CfDs to build up stakes in companies and influence corporate governance. The FSA says the failures are not widespread but need to be addressed to ensure market confidence and efficiency is maintained. The paper proposes two different w...
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