FSA bring forward disclosure regime for Contracts for Difference (CfDs) to 1 June 2009

Accordingly, firm’s now have less than three months to put in place the changes to their processes to make the market disclosures.  The new rules cover financial instruments which give a legal right to acquire shares or have a similar economic effect to shares in a UK listed company.  Shares and such financial instruments will have to be aggregated and disclosed once at the 3% threshold. 

In an additional change from the proposals, the FSA has amended the basis of disclosures to a delta adjusted basis, on the basis that this is a more accurate reflection of the actual exposure. They will allow reporting on either a nominal or a delta-adjusted basis for a transitional period of seven months from implementation (i.e. until 31 December 2009).  However where firms report on a nominal basis during the transitional period FSA will require sufficient information to be provided by the Firm to allow market participants to calculate the underlying exposure more accurately.

These CfD disclosure provisions are clearly an important component of the FSA’s measures to prevent disclosure and non-disclosure related market abuse and represent another tightening of the regime which is beginning to look very different from in 2007.  The FSA will use the mandatory disclosure rules to seek to ensure financial instruments are not used covertly to influence corporate governance and/or build up stakes in companies.  An exemption has also been put in place for CfD writers acting in a client-serving capacity, to prevent unnecessary disclosures to the market.

Details of the new regime are set out in a Policy Statement 09/03 can be found at http://www.fsa.gov.uk/pubs/policy/ps09_03.pdf

If you would like to discuss further how we can assist please contact Scott Wilson, Stephen Burke, Chris Rexworthy, or your usual IMS Consultant.

3rd March 2009

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