Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 11) Regulations 2005
- Act Code: SFA2001-S463-2005
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289), specifically section 337(1)
- Commencement: 15 July 2005
- Enacting Body: Monetary Authority of Singapore (MAS)
- Legislative Instrument Number: SL 463/2005
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (“Bonds”, “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the Securities and Futures Act for specified stabilising action
- Status: Current version as at 27 Mar 2026 (per the provided extract)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 11) Regulations 2005 (“Stabilising Action (Bonds) Regulations”) is a targeted regulatory instrument that creates a narrow exemption from certain market conduct restrictions under the Securities and Futures Act (the “SFA”). In practical terms, it allows specified persons to take “stabilising action” in relation to a particular bond issue without triggering prohibitions that would otherwise apply.
Stabilising action is a well-known mechanism in capital markets. When a new bond is issued, market liquidity and price discovery may be volatile. Under certain conditions, market participants may take steps to support or stabilise the trading price to reduce disorderly market conditions. However, stabilisation can resemble prohibited conduct if not carefully bounded—hence the need for statutory exemptions.
This Regulations’ scope is deliberately limited. It defines a specific set of “Bonds” (a particular 5-year EURO convertible bond issued by Motherson Sumi Systems Limited) and a specific set of actors (Nomura International (Hong Kong) Limited and its related corporations). It also imposes a time window (within 30 days from the date of issue) and limits the exemption to stabilising action taken by persons falling within specified categories under the SFA (including “persons referred to in section 274” and “sophisticated investors” as defined in section 275(2)).
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states that they come into operation on 15 July 2005. For practitioners, this matters when assessing whether stabilising conduct occurred within the legal framework applicable at the relevant time.
Section 2 (Definitions) is central because it determines the boundaries of the exemption. The Regulations define two terms:
- “Bonds”: The Regulations specify the exact instrument—5-year EURO convertible bonds due July 2010 issued by Motherson Sumi Systems Limited, with a principal amount up to the EURO equivalent of US$75 million. The bonds are convertible into equity shares of Motherson Sumi Systems Limited, with a par value of 1 Indian Rupees each.
- “stabilising action”: This is defined as an action taken in Singapore or elsewhere by Nomura International (Hong Kong) Limited (or any of its related corporations) to buy, or to offer or agree to buy, any of the Bonds in order to stabilise or maintain the market price of the Bonds in Singapore or elsewhere.
From a compliance perspective, the definition is both instrument-specific and actor-specific. If the stabilising activity relates to a different bond issue, or is undertaken by a different entity not captured by the definition, the exemption would not apply. Similarly, the conduct must be directed at stabilising or maintaining market price; purely incidental trading would not necessarily qualify.
Section 3 (Exemption) provides the operative relief. It states that sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of any of the Bonds, within 30 days from the date of issue, with stabilising action taken by either:
- (a) a person referred to in section 274 of the Act; or
- (b) a sophisticated investor as defined in section 275(2) of the Act.
Although the extract does not reproduce sections 197 and 198 of the SFA, the structure indicates that those provisions are the market conduct prohibitions that would otherwise restrict or penalise the relevant trading behaviour. The exemption is therefore best understood as a “carve-out” that neutralises the risk of contravention for qualifying stabilising activity.
Practically, Section 3 imposes three cumulative conditions:
- Time condition: stabilising action must occur within 30 days from the date of issue of the Bonds.
- Person condition: the stabilising action must be taken by a person within the categories in section 274 of the SFA or by a sophisticated investor under section 275(2).
- Instrument and purpose condition: the action must be “stabilising action” as defined—i.e., buying (or offering/agreeing to buy) the specified Bonds to stabilise or maintain market price.
For counsel advising issuers, arrangers, or dealers, these conditions are the compliance checklist. If any element fails—wrong bond, wrong actor, wrong timing, or wrong purpose—the exemption may not protect the conduct.
How Is This Legislation Structured?
The Regulations are short and structured around a standard subsidiary-legislation format:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that precisely identify the relevant bond issue and the relevant stabilising actors and conduct.
- Section 3 establishes the exemption from specified SFA provisions, subject to timing and eligibility conditions.
There are no additional parts or complex schedules in the extract. The legal effect is therefore concentrated in the definitions and the exemption clause.
Who Does This Legislation Apply To?
While the Regulations are made under the SFA and relate to market conduct, their practical application is to market participants who may engage in stabilising activity in connection with the specified bond issue. The definition of “stabilising action” points to Nomura International (Hong Kong) Limited and its related corporations as the relevant stabilising actors, acting in Singapore or elsewhere.
However, Section 3 further narrows the exemption by requiring that the stabilising action be taken by either (i) a person referred to in section 274 of the SFA, or (ii) a sophisticated investor under section 275(2). Accordingly, even where the conduct is within the “stabilising action” definition, the exemption will only be available if the stabilising entity fits the SFA eligibility categories.
For practitioners, this means advising on stabilisation should not stop at identifying the bond and the dealer group. It should also confirm the stabilising party’s status under the SFA framework (including whether it falls within section 274 or qualifies as a sophisticated investor).
Why Is This Legislation Important?
This Regulations is important because it demonstrates how Singapore law balances two competing objectives: (1) maintaining fair and orderly markets by prohibiting manipulative or misleading trading conduct, and (2) permitting limited stabilisation to support price formation during the early life of a bond issue.
By exempting stabilising action from sections 197 and 198 of the SFA, the Regulations provides legal certainty to participants who engage in stabilisation that meets the defined conditions. Without such an exemption, stabilising trades—especially those that involve buying or agreeing to buy—could be scrutinised as potentially prohibited market conduct. The exemption therefore reduces regulatory risk and supports the functioning of underwriting and distribution processes for convertible bonds.
From an enforcement and compliance standpoint, the narrow tailoring is equally significant. The exemption is limited to a specific bond issue (Motherson Sumi Systems Limited’s 5-year EURO convertible bonds due July 2010), a specific stabilising actor group (Nomura International (Hong Kong) Limited and related corporations), and a strict time period (30 days from issue). This suggests that MAS expects stabilisation to be exceptional, bounded, and purpose-driven rather than a general trading strategy.
For lawyers, the key takeaway is that stabilisation is not automatically lawful. It becomes lawful (or at least exempt from particular prohibitions) only when the statutory conditions are met. In practice, counsel should ensure that trading records, internal approvals, and communications are consistent with “stabilise or maintain the market price” and that the trades occur within the permitted window. Where stabilising action is conducted “in Singapore or elsewhere,” cross-border compliance coordination may also be required to ensure that the conduct remains within the Singapore exemption’s scope.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular, sections 197, 198, 274, 275(2), and the regulation-making power in section 337(1)
- Futures Act (as referenced in the provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Legislation Timeline (for version control and amendment history, as referenced in the provided metadata)
Source Documents
This article provides an overview of the Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 11) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.