On 3 March 2009, the FSA published a policy statement confirming the implementation of an extended disclosure regime for substantial economic interests in shares held through contracts for difference (CFDs) and similar financial instruments.

The changes will be implemented by amendments to the rules relating to the notification of the acquisition or disposal of major shareholdings set out in chapter 5 of the Disclosure and Transparency Rules. The new rules will come into effect on 1 June 2009 (rather than 1 September 2009, as previously contemplated in FSA consultation paper CP08/17).

Under the new rules, interests in shares held through CFDs and similar financial instruments will require to be included in the determination of whether a person has a notification obligation pursuant to DTR 5. Accordingly, subject to an exemption for CFD writers serving as intermediaries, CFDs will count towards the existing notification thresholds (with the initial disclosure threshold maintained at 3%).

It is important to note that DTR 5 already applies to financial instruments resulting in an entitlement to acquire shares to which voting rights are attached. The significance of the rule change is that it will extend DTR 5 to catch 'long' derivative financial instruments referenced to shares where they are settled in cash (expected to include most CFDs), as well as where they are settled in shares. The FSA has explained that, in its view, even cash-settled instruments may give the holder the potential to gain an economic advantage in acquiring, or gaining access to, the underlying shares, for example because its counterparty is likely to have hedged with the underlying shares or with an instrument which may provide access to such shares.

View FSA Policy Statement 09/3: Disclosure of Contracts for Difference (28 page pdf).

View FSA instrument amending DTR 5 (8 page pdf)

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