The FSA is to demand greater disclosure of significant economic interests in a company’s shares held through derivatives such as contracts for difference.
In a consultation paper published today, the FSA says potential market failures could result from using CFDs on an undisclosed basis to influence corporate governance and build up stakes in companies.
In September, Pearl was able to increase its stake in target Resolution significantly without disclosing this to the market at the time.
The paper proposes two potential approaches. The first would require disclosure of any CFDs written in reference to 3 per cent or more of total voting rights attached to a company’s shares unless it was clear that the holder could not exercise or seek to exercise voting rights or made a clear statement to that effect.
The alternative approach would achieve the same objectives by requiring CFD holders to reveal all economic interests in stakes of 5 per cent or more in a company’s shares.
Director of markets Sally Dewar says: “This is not a clampdown on CFDs but a means of addressing concerns about their use on an undisclosed basis.”