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FSA moves to make hedge funds disclose CfDs

Independent- The UK’s financial watchdog has targeted hedge funds for the second time this month, demanding more disclosure for those trying to build anonymous stakes in companies using a complex derivative, in a bid to combat market failure.

The move to force disclosure of contracts for difference (CfDs), which comes just weeks after the regulator brought in disclosure rules for short positions in certain circumstances, will leave some hedge funds "fuming", according to one market expert. CfDs and shorting are tactics predominantly used by hedge fund investors.

The Financial Services Authority outlined plans yesterday for investors to disclose their positions if they have built up more than 3 per cent in a company through CfDs. Under the new rules, investors must disclose a position, whether held through shares or CfDs or a combination. Previously there had been no requirement to disclose any CfDs positions other than when the target was in a takeover process.

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