Patrick Hosking, The Times
Secret stakebuilders in London-listed companies could keep their activities hidden for longer under proposals tabled by the chief City regulator yesterday.
The Financial Services Authority said it was considering whether to scrap the present rule that forces stakebuilders to disclose holdings as soon as they go above 3 per cent of the target company.
The threshold could be raised to 5 per cent, which is the minimum standard across Europe, the FSA said.
The disclosure regime could be further weakened for larger holdings. At present shareholders have to notify the market at each 1 per cent notch above 3 per cent.
One option would be for notification only at the 5, 10, 15, 20, 25, 30 and 50 per cent levels, the FSA said.
Stakebuilders could also be given more time to disclose to the market. At present they have to do so within two days of the notifiable event, but this could be lengthened to seven days.
The FSA, which is taking over responsibility for disclosure from the Department of Trade and Industry, said it was inviting views on either retaining the existing regime or moving to the European minimum, as set out in the Transparency Directive.
It also announced that it had no intention of broadening disclosure rules to cover derivatives such us contracts for difference (CFDs). Stakebuilders can secretly build large positions in companies by buying CFDs rather than the underlying shares.
City professionals said the proposals might be welcomed by arbitrageurs and corporate raiders but not by companies.
Nicholas Gold, a corporate financier at ING Barings, said: “I can’t see why companies would like this. It would make it easier for predators to acquire covert stakes.”
There may also be disappointment that the FSA, unlike the Takeover Panel, does not plan to extend the rules to CFDs and other derivatives.
An FSA spokesman said the new rule could create cost savings for institutional investors but would reduce disclosure. The regulator was leaning towards keeping the present regime, he said.
In separate proposals the FSA also paved the way for hedge funds to list in London and for traditional investment trusts to short sell for the first time. It said it wanted to scrap prescriptive rules on London-listed investment vehicles in favour of a more flexible principles-based regime.
The proposals would allow individual hedge funds to list in London, making them more accessible to private investors of modest means. They would also give greater freedom to investment trusts, allowing them to go short – in effect, bet on a share price falling -and to invest in derivatives. The rule preventing investment trusts allocating more than 15 per cent of their portfolio to a single asset would also be scrapped. However, the FSA said that investors would be protected by a strong disclosure regime, under which listed vehicles would have to explain annually how they were spreading risk.