The UK’s Financial Services Authority (FSA) has issued Policy Release 09/3, with final rules requiring that exposure through equity derivatives positions be included in determining whether equity positions (both cash settled and physically settled) meet the 3% minimum for disclosure. Consistent with its principles-based approach, the FSA is concerned with the economic effect of a financial instrument in determining whether it should be counted towards the 3% disclosure minimum. The FSA wants to avoid an “excessively legalistic approach that would encourage the creation of instruments to avoid disclosure.”

With respect to options, the size of the positions for disclosure purposes is determined on a delta adjusted basis, rather than a nominal basis, to more accurately reflect the actual economic interest at the time of the determination.

The FSA decided to move forward the effective date of Policy Statement 09/3, from September 1, 2009 to June 1, 2009, “in light of the changes in market conditions since last summer and the need for increased transparency driven by these changes.” Equity derivatives transactions entered into by intermediaries on behalf of clients are not covered by the new requirements.