New CfD disclosure regime comes into force on June 1, 2009.

Abstract

Purpose--The purpose of this paper is to explain changes to Chapter 5 of the UK Disclosure and Transparency Rules (DTR 5), introducing new disclosure requirements relating to holdings of financial instruments that have a similar economic effect to shares, such as CfDs, that took effect on June 1, 2009.

Design/methodology/approach--The paper explains the principles behind the extended disclosure regime and summarizes questions and answers from the FSA to assist market participants' understanding of that regime, covering issues such as domicile of the issuer, instruments covered, how a disclosable holding is calculated, the inclusion of financial instruments relating to unissued shares, treatment of holdings acquired before June 1, 2009, potential double counting, how the regime applies to intra-group movements of holdings and delta-adjusted reporting, and exemptions for client-serving intermediaries, market timing, trading books, and investment management.

Findings--Qualifiying financial instruments give a legal right to acquire (on the holder's own initiative) shares already in issue and with voting rights attached. The policy behind the new regime is to require the disclosure of financial instruments with similar economic effect to qualifying financial instruments which are used to build stakes in companies.

Originality/value--The paper presents practical guidance from experienced financial institution and securities lawyers.

Keywords Disclosure, Financial instruments, United Kingdom

Paper type Technical paper

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On June 1, 2009, changes to Chapter 5 of the UK Disclosure and Transparency Rules (DTR 5) took effect. These require an investor in a UK incorporated issuer traded on a regulated or a prescribed market, to disclose (provided the relevant disclosure thresholds are reached) not only a holding of voting rights attaching to shares and shares underlying qualifying financial instruments, but also holdings in financial instruments that have a similar economic effect to qualifying financial instruments, such as CfDs.

It was originally expected that these rules would not come into effect until September 1, 2009. The FSA decided to expedite their implementation in light of changes in market conditions since July 2008 and the need for increased transparency driven by these changes.

The new disclosure regime

DTR 5 requires the disclosure of holdings in shares and …