"These undisclosed interests are contrary to good governance where managers are fully accountable to their shareholders and investors are able to see who else may have an influence over the company which they own."

CFDs do not carry voting rights, but can be converted into shares with voting rights by the investment banks who sell the derivatives and hold the underlying shares in order to hedge their own positions.

The Investor Relations Society welcomed the FSA’s announcement but called on the regulator to speed up its timetable for the changes.

The FSA will publish a policy statement and draft rules in September with final rules to be published in February 2009. The new regulation will exempt CFD writers who act as intermediaries.

"Our goal is to provide an effective and proportionate disclosure regime that works for all involved, and sustains market confidence and efficiency," FSA Director of Markets Alexander Justham said.

(Reporting by Eleanor Wason; Editing by Quentin Bryar)