The Association of Investment Trusts has called for improved disclosure of contracts for difference (CFDs) to protect investors and ensure a fair market.
CFDs can be used by market participants to build a stake in a less transparent way than if shares are simply being bought, and can mislead sellers who may sell shares at a cheaper rate than if they were aware that stake building was taking place.
The AITC believes the use of CFDs allows stake builders to acquire large amounts of shares without having to make a disclosure until they are well over the normal disclosure limit of 3 per cent of a company’s share capital.
The AITC is proposing that the FSA conduct reseach to determine the extent of the problem and to devise a regulatory response to it.
AITC director general Daniel Godfrey says: “The takeover panel already requires CFDs to be disclosed during offer periods so it is logical that their use in stake building ahead of a formal offer period, and which therefore falls outside the scope of the panel’s rules, should also be addressed.”