UK: contracts for difference - general disclosure regime proposed by the FSA in respect of long positions

In November 2007 the FSA published a consultation paper titled "Disclosure of Contracts for Difference", which discussed the possible market failures (inefficient price formation, distorted market for takeovers and diminished market confidence) arising from non-disclosure of Contracts for Difference (CfDs) and the regulatory options available to address those failures. In this paper the FSA noted (at para. 1.8):

Despite the growth in the market, CfDs mostly remain outside the regulatory framework governing disclosure. This framework exists primarily to provide to the public accurate, comprehensive and timely information about changes in major shareholdings in companies issuing shares. The current disclosure requirements are therefore referenced to direct and indirect control of voting rights attaching to a share".

The FSA has today published a statement explaining its position following the end of the consultation period. In this statement the FSA explains:

We have concluded that our objective of addressing the market failures the [consultation paper] identified in relation to voting rights and corporate control can best be addressed through a general disclosure regime. Therefore we have decided to implement a general disclosure regime of long CfD positions, based on Option 3 in the consultation paper, but with two significant modifications: [1] in relation to aggregation and disclosure thresholds; and [2] in relation to an exemption for CfD intermediaries".

The FSA proposes setting the disclosure threshold at 3%., which is in line with the existing requirement with regard to voting rights in listed securities found within DTR Rule 5.1.2 (part of the Vote Holder and Issuer Notification Rules (DTR 5) within the FSA Handbook). A further consultation period has begun - on the technicalities of the proposals - and the FSA plans to publish a further statement and draft rules in September. The final rules will be published in February 2009.

For further information see:
FSA press release | FSA policy statement | November 2007 consultation paper | November 2007 consultation newsletter | FSA Handbook: DTR5 | Financial Times newspaper article | Times newspaper article |