Brian Lenihan Jnr (Dublin West, Fianna Fail)

That is always one of the great difficulties with all economic advice — it tends not to come from disinterested parties. A number of financial instruments are available which can be used to acquire these positions in the shares of publicly listed companies without acquiring direct control of them. Clearly these instruments are used increasingly by investors to avoid disclosure of their economic interests in particular companies. There has been particular controversy about contracts for difference. However, the section is drafted to be wide enough to capture other instruments which had that intention. I am not sure it is designed to go beyond that.

The Financial Regulator and the Irish Stock Exchange are very keen that a disclosure regime for CFD trades should be put in place. The establishment of such a regime would require primary legislation because there are no EU provisions in this area. Powers to require disclosure do not exist yet in the domestic legislation. The regulator and the Stock Exchange are of the view that the Minister should be given the power to introduce market disclosure requirements relating to any financial instruments where it is necessary to ensure fair, orderly or transparent trading conditions.

Although the genesis of this proposal relates to CFDs, in my opinion it is not prudent to confine it explicitly to a CFD as the nature of financial instruments changes constantly and other financial instruments can quickly become the focus of trading activity. Consequently, a broad provision in terms of financial instruments in general is required and detailed provisions will be set out in the regulations. The enclosed draft head would enable the Minister to make regulations requiring those who have transacted in financial instruments to disclose certain information relating to those transactions to the regulator or the market. It is an enabling provision which can be extended to all financial instruments to cover future market developments.

At this stage there is no immediate expectation of regulations being required for instruments other than contracts for difference. There is a degree of urgency because the United Kingdom is expected to announce a disclosure regime shortly, with a view to introducing the new regime later in the year. Given that some Irish stocks are listed also in the London stock exchange it is important that we should be able to react swiftly to any UK moves. The Financial Regulator receives information on some of these instruments if they are regulated by an Irish firm. However, the great bulk of contracts for difference business takes place abroad, especially in London. The regulator has a reciprocal arrangement with the United Kingdom financial services authority to receive some information on those trades. However, this is limited and it means that the London market and the contracts for difference in Irish shares cannot be supervised effectively at this time. The strengthening of the regime of control both here and in the United Kingdom is of importance and we will continue to raise these matters with the United Kingdom authorities.

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