UK regulator to require CFD disclosure next year

The UK Financial Services Authority said on Thursday it planned to make investors disclose holdings of more than 3 percent in companies through contracts for difference (CFD).

The FSA said the final draft of the rules on CFD — under which one party agrees to pay another the difference between the current and future price of a share — would be published in February 2009 and come into force on Sept. 1 next year.

"Our goal is to provide an effective and proportionate disclosure regime that works for all involved, and sustains market confidence and efficiency," said FSA Director of Markets Alexander Justham.

CFD holders, who effectively have the benefits and risks of a stock without owning it, are currently not obliged to make their positions public, allowing some hedge funds to use them to anonymously build sizeable stakes in companies they wish to influence.

The Association of Investment Companies, which represents the investment trust industry, welcomed the FSA's move.

"These disclosures should let shareholders understand who might try and exert influence over the affairs of companies they own and then allow them to act accordingly to protect their own long-term interests," the AIC said in a statement.