The UK reforms its Disclosure Requirement in CFD

New disclosure rules have quietly gone into effect on the 1st June regarding disclosure of long CFDs and similar derivative products in the UK.

The use over recent years of contracts for difference has allowed corporate predators to build up control of huge chunks of shares while lurking below the radar. Such positions have not until the present time been obliged to be declared in the same way as actual holdings of shares, which must be revealed when the level of ownership rises above three per cent of a company.

However, the new regime will require investors who hold 3% or more of a company’s voting equity through either shares, CFDs, or other relevant derivatives, or an aggregation of shares, CFDs, and other relevant derivatives, to disclose their stakes. Additionally, separate disclosures are required where holdings increase or decrease above or below the 1% steps set out in the Disclosure and Transparency Rules.

This is limited to companies listed on the UK London Stock Exchange but France is also in the process of formulating disclosure requirements to enter into effect on 1 August 2009.

Thoughts: Ever since the EU Transparency Directive which came into force at the start of January 2007 many of the national European governments have worked hard at beefing up their corporate disclosure and transparency standards. Legislation requiring disclosure of synthetic holdings will be a natural progression for better transparency. However, some European countries like Italy still lag behind with disclosure rules and Italy for instance doesn’t even require quarterly reporting.

Tags: CFDs, contracts for difference, disclosure

This entry was posted on Thursday, June 4th, 2009 at 1:58 pm and is filed under Industry Happenings, Industry News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.