The UK

The UK's Financial Services Authority propose to adopt new measures to extend the major shareholding notification obligations in the UK Disclosure and Transparency Rules to shares held through derivatives such as contracts for difference and similar financial instruments. A contract for difference (CFD) is an agreement between two parties to exchange, at the close of the contract, the difference between the opening price and the closing price of the particular unit. When applied to shares, a CFD is an equity derivative which allows investors to speculate on share price movements without having to own the shares in the underlying company.

The new UK rules will take effect on 1 June 2009 (which date has been brought forward from September). Under the new regime, shares together with CFDs and similar financial instruments will have to be aggregated and disclosed once they reach the 3% threshold. The FSA has commented that this will ensure that such instruments are not used covertly to influence corporate governance or build up stakes in companies. "This is a very significant step in improving market transparency" said Alexander Justham, FSA's director of markets. "The new rules will resolve some of the concerns raised about the risks of market players devising ways to avoid disclosure or over-disclosing."

There will be an exemption for CFD writers, similar to the Takeover Panel's disclosure exemption for Recognised Intermediaries, in order to prevent unnecessary disclosures to the market.


We have learned from the Financial Regulator that it is also proposed to introduce measures similar to the above in Ireland.

It is proposed that enabling provisions will first be introduced to allow the Minster for Finance make regulations to deal with the issue. These enabling provisions will be introduced via the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Bill 2009. Section 12 of this Bill empowers the Minister to make regulations requiring persons who have entered into "transactions in specified financial instruments or classes of financial instruments" to make disclosures in relation to them. We understand that regulations to be introduced pursuant to this section are currently being drafted and that the effect of the regulations is likely to be the extension of the major shareholding notification obligations in the Irish Transparency Regulations (the Irish equivalent of the UK Disclosure and Transparency Rules) to shares held through derivatives such as contracts for difference.

We have no indication of when these measures will come into effect as yet.