News
Investor Relations Society welcomes new rules on disclosure of holdings including Contracts for Difference.
Disclosures will add to market transparency and improve companies' interaction with investors.
The Investor Relations Society (IR Society) welcomes the announcement today by the Financial Services Authority (FSA) of new rules surrounding the disclosure of positions held by investors using contracts for difference (CfDs).
During the FSA Consultation the IR Society lobbied for a regime similar to the successful Takeover Panel rules, applied generally, ie economic interests in shares such as CfDs and similar instruments in an aggregated position of 3% and above should be disclosable in line with the existing DTR regime.
"We are pleased that the FSA has accepted the force of our arguments," commented Peregrine Riviere Chairman of the IR Society, "We believe the new rules will enhance the ways in which companies can interact with their investors, and at the same time support the validity of the use of CfDs as acceptable ways of investing. We would however like to see the regime introduced as soon as possible, and encourage the FSA to shorten their proposed timetable".
The absence of transparency in CfDs and similar instruments is of great concern to UK listed companies. The Society and its members support completely the principles of full transparency. Whilst the Society believes that CfDs have an important role to play in creating liquidity for UK equities, we believe that their built in ‘stealth' feature inhibits an open and fair market for securities, and consequently we welcome today's announcement which reflects the changes which we proposed to the FSA.
For further information contact:
The Investor Relations Society
Peregrine Riviere - Chairman 07909 907 193
Michael Mitchell - General Manager 020 7379 1763
Download the FSA's CfD policy update. (PDF 28k)
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.
Published: 2 July, 2008