Takeover Panel proposes changes to disclosure rules

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The Independent Online

Hedge funds and investment banks will have to disclose dealings in derivatives and options during takeover battles from the final quarter of this year, under rules proposed by the Takeover Panel.

Hedge funds and investment banks will have to disclose dealings in derivatives and options during takeover battles from the final quarter of this year, under rules proposed by the Takeover Panel.

It issued a detailed consultation paper yesterday amid growing concern over the widespread use of derivatives in takeover battles, and invited comments by 24 June. The rules are expected to take effect towards the end of the year.

Only institutions or individuals holding more than a 1 per cent stake in a company's shares currently have to declare dealings when the business is subject to a takeover bid. Holders of derivatives, such as contracts for difference (CFDs), have so far escaped disclosure. Under the panel's proposals, anyone holding derivatives or options over more than 1 per cent of a company's stock must declare all dealings.

The majority of dealings in takeover situations involve derivatives outside the regulatory regime.

The panel highlighted the cases of Marks & Spencer, and BAE Systems' offer for Alvis last year. When the retail entrepreneur Philip Green tried to buy M&S, several hedge funds which had acquired CFDs sought to put pressure on the retailer's board to open its books to him. Separately, BAE obtained commitments from funds holding CFDs in 16 per cent of Alvis's shares in support of its offer.

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