Irish Finance Minister Brian Lenihan has announced that new rules regulating derivatives will be rolled out within a month, forcing traders and investors to disclose the building of stakes in companies using such financial instruments.
The new disclosure regime will affect CFDs (contracts for differences), which allow investors to speculate that a stock price will rise or fall without owning the underlying stock. In some cases, investors can opt to acquire the underlying stock from their CFD providers at a later date.
‘We expect to have legislation on the matter published within the next four weeks,’ a spokesman for the Dublin-based Finance Ministry said, without divulging any specific details.
In 2009, the United Kingdom’s regulator also brought forward the implementation of new regulations which obliged long holders of CFDs to be announced in the public domain when holdings reach 3 percent. Holders of ordinary shareholdings in Irish companies also have to disclose the stake once a 3 percent threshold is passed.
The family of billionaire Sean Quinn in July 2008 stated that it was planning to acquire 15% of Anglo Irish Bank Corp., after building a stake in the company utilising CFDs. The Irish government nationalised in January 2009 the bank amidst the global financial crisis, wiping out shareholders in the process.
Moreover, Anglo Irish stated in its 2008 annual report that ’10 long-standing clients of the bank’ had bought shares from CFD providers with a 451 million-euro loan ($625 million) from the lender.
The regulator announced on February 15, 2009 that it was ‘looking into all aspects of the unwinding of this large CFD position in Anglo Irish shares, including the nature of the loans to a group of investors.’
