News
The Investor Relations Society (IRS) today welcomed the proposal in Sir Andrew Large’s Hedge Fund Working Group (HFWG) report for greater disclosure of holdings in companies through derivatives such as Contracts For Difference (CFDs).
In his report Sir Andrew called upon regulators to extend the principles of disclosure which currently exist in take over situations to cover all periods:
“The HFWG acknowledges that companies have a right to know who owns them or who has an ability to easily obtain significant voting power. Indeed, members of the HFWG would welcome higher levels of disclosure.”….“the HFWG recommends that regulators take action to introduce a regime (similar to that of the Takeover Panel in the United Kingdom applicable during takeover offer periods) requiring notification of “economic” interests in shares held via instruments such as CFDs.”
In a recent survey carried out by the IRS of the UK’s top quoted companies, over 95% of respondents supported the extension of the Financial Services Authority’s (FSA) major shareholder disclosure regime to cover holders of CFDs and other derivative instruments.
Commenting on the report, Peregrine Riviere, Chairman of the IRS said:
“This confirms the position which we have re-iterated on a number of occasions to the FSA. We will be calling on them to tighten the disclosure requirements to ensure a level playing field for all investors and to stamp out market abuse. When even the holders of CFDs themselves are encouraging improved disclosure, it begs the question why the FSA can't get on and enforce the consensus view. The FSA must not let the investment banks, who write the CFD’s, stand in the way of good market governance"
For further information contact:
The Investor Relations Society
Peregrine Riviere – Chairman
07909 907 193
Michael Mitchell – General Manager
020 7379 1763
Notes for editors:
The Investor Relations Society represents members working for public companies to develop effective two way communication with the markets and create a level playing field for all investors. It has over 600 members drawn both from the UK and overseas, including the majority of the FTSE 100 and much of the FTSE 250.
Much of the market regulation in the UK is in the hands of the Financial Services Authority (FSA). Through their Disclosure and Transparency Rules (DTR) regime the FSA has implemented the requirements of the EU Transparency Obligation Directive. DTR supplements the disclosure requirements contained in the Companies Act 2006. Under the existing DTR regime any shareholder controlling more than 3% of a company’s shares has to disclose its position to the market. In addition under Companies Act s793 companies can ask shareholders to disclose their beneficial shareholdings. Although some types of derivatives are covered by DTR, CFD holdings are not covered by either the DTR or the Companies Act regulatory environment, yet such holdings can easily be converted into shares and many holders exercise voting rights through the ‘issuing bank’.
The potential importance of such positions is recognised under the Takeover Code and all CFD and derivative holdings in excess of 1% have to be declared when companies are the subject of a takeover bid.
The FSA is currently considering options for possible changes to the regime and is expected to issue a consultation document later in the year.
Published: 11 October, 2007