Proposals to force contracts for difference (CFDs) holders to reveal their positions will not work says the Investor Relations Society (IRS).

The Financial Services Authority (FSA) last month unveiled plans to create new rules especially for CFDs. But the IRS would prefer CFDs added to existing disclosure and transparency rules (DTRs) for shares.

The DTRs say all holdings above 3% have to be disclosed. But the FSA wants CFD disclosure at 3% only when the investor controls the underlying shares. The IRS says this condition would be impossible to police.

The IRS represents companies but non-disclosure of CFDs is a hot issue for private investors too. Inexplicable share price movements are often blamed on unofficial leaks of hidden CFD positions – stockbrokers also want a mirror of the current DTRs.

Holders of CFDs can use the instruments to acquire shares by stealth. CFD brokers have to buy shares in the process of writing the contracts. Secret agreements give the investor the right to buy the broker’s shares once the contract expires.

The FSA has put forward a second proposal requiring all holdings above 5% to be disclosed in what would appear a duplication of the current mandatory DTRs for shares. But IRS says investors could still secretly build to 8%.

The FSA clearly favours the first proposal, saying its cost of implementation would be ‘minimal’ while putting a £20 million-£50 million price tag on the second option. A system that is reliant on investors being upfront has been criticised as naive.