Investors secretly building stakes in listed companies by using synthetic instruments will have to unmask themselves when they go beyond 3 per cent under new rules announced today.

The Financial Services Authority (FSA), the City regulator, announced a new regime for the disclosure of Contracts For Difference (CFDs) - popular derivatives used by many investors to give them the effect of owning the underlying shares but without paying Stamp Duty.

The FSA said investors in CFDs or a combination of CFDs and actual shares would be obliged to disclose their holdings when reaching 3 per cent of the targeted company, the same level at which disclosure kicks in for ordinary shares alone.

The FSA decided against a less radical disclosure option, under which CFDs for cash settlement would have been excluded from the new rules.

Only CFDs giving the holder the prospect of exercising the votes in the underlying shares would have been covered with this option.

Sarah Bowles, a partner at Simmons & Simmons, commented, "This comes as a surprise. Many had been expecting the [less onerous] option." The rules would add to costs for some investors, which would have to adjust their systems.

However, traditional investors applauded the move as giving more transparency. "It's a good thing. Give the FSA a tick," said a senior figure in one major investment house.

Alexander Justham, director of markets at the FSA, said: "Our goal is to provide an effective and proportionate disclosure regime that works for all involved, and sustains market confidence and efficiency." Final rules would be published in February 2009, he said.

The new rules do not apply to CFD short positions - bets that a share price will fall.

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