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 (SFA), in particular section 337(1)
- Regulation Number: SL 463/2005
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 11) Regulations 2005
- Commencement: 15 July 2005
- Status: Current version as at 27 Mar 2026 (per the provided extract)
- Key Provisions: Section 1 (citation and commencement), Section 2 (definitions), Section 3 (exemption)
- Relevant SFA Provisions Mentioned: Sections 197, 198, 274, 275(2), and 337(1)
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 Exemption Regulations”) is a targeted regulatory instrument made under the Securities and Futures Act (SFA). In plain terms, it creates a narrow exemption from certain market conduct restrictions when specified parties take “stabilising action” in relation to a particular bond issue.
Market conduct rules in the SFA are designed to protect investors and maintain fair and orderly markets. However, stabilisation practices—such as limited buying activity intended to support the price of a newly issued security—can be legitimate and necessary to reduce volatility immediately after issuance. This legislation recognises that reality by carving out stabilisation activity from specific prohibitions, but only if strict conditions are met.
Importantly, the exemption is not general. It is tied to a defined set of “Bonds” (a specific 5-year EURO convertible bond issue by Motherson Sumi Systems Limited) and to stabilising action taken by a specified stabiliser (Nomura International (Hong Kong) Limited and its related corporations). It also limits the time window for the exempt activity to within 30 days from the date of issue.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal citation and states that the Regulations come into operation on 15 July 2005. For practitioners, this matters for determining whether stabilising activity undertaken around the issuance period falls within the regulatory framework.
Section 2 (Definitions) is central because it defines both the subject matter (“Bonds”) and the conduct (“stabilising action”). The Regulations define “Bonds” as the 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 Rupee each.
The definition of “stabilising action” is equally specific. It refers to 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. This wording is important: it captures not only actual purchases but also offers or agreements to buy—conduct that could otherwise be caught by market manipulation or dealing restrictions.
Section 3 (Exemption) is the operative provision. It states that Sections 197 and 198 of the Act 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 carried out 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.
While the extract does not reproduce the text of SFA sections 197, 198, 274, or 275(2), the structure indicates that the SFA contains prohibitions (in sections 197 and 198) that would otherwise restrict certain dealing activities. The exemption effectively removes those prohibitions for the specified stabilising conduct, but only when the counterparty or relevant participant falls within the categories in section 274 or is a sophisticated investor under section 275(2).
For legal practice, the key compliance tasks arising from Section 3 are therefore: (1) confirm that the instrument being dealt with matches the defined “Bonds”; (2) confirm that the stabiliser is Nomura International (Hong Kong) Limited or a related corporation; (3) ensure the stabilising activity occurs within the 30-day post-issuance period; and (4) ensure the dealing is with a person falling within section 274 or with a sophisticated investor as defined by the SFA.
How Is This Legislation Structured?
The Regulations are concise and consist of three provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that narrow the scope of the exemption to a particular bond issue and a particular stabilising actor and purpose.
- Section 3 grants the exemption from specified SFA provisions (sections 197 and 198), subject to the time limit and the permitted categories of persons (section 274 persons or sophisticated investors under section 275(2)).
From a practitioner’s perspective, the structure reflects a common approach in Singapore market conduct regulation: rather than rewriting the SFA, subsidiary regulations create targeted exemptions for specific transactions and participants, thereby preserving the general integrity of the market conduct framework.
Who Does This Legislation Apply To?
The exemption is directed at stabilising action in relation to the defined “Bonds.” In practical terms, it applies to stabilising activity undertaken by Nomura International (Hong Kong) Limited or its related corporations, because the definition of “stabilising action” is anchored to that entity and its corporate group.
However, the exemption is also conditional on the identity of the counterparty or relevant participant. Section 3 requires that the stabilising action be taken within 30 days from the date of issue with either a person referred to in section 274 of the SFA or a sophisticated investor as defined in section 275(2). Accordingly, even if the stabiliser and the bonds match, the exemption may not apply if the dealing is with a party outside those categories.
Therefore, the Regulations create a compliance “gatekeeping” mechanism: the stabiliser’s identity, the bond instrument, the timing, and the counterparty category must all align for the exemption to operate.
Why Is This Legislation Important?
This legislation is important because it balances two regulatory objectives that can otherwise conflict: (1) preventing unfair dealing and market manipulation, and (2) allowing legitimate stabilisation practices that support orderly trading during the immediate post-issuance period of securities.
By exempting stabilising action from specific SFA provisions (sections 197 and 198), the Regulations reduce the risk that a stabilising programme—if structured within the defined parameters—would be treated as unlawful market conduct. This is particularly relevant for convertible bonds, where pricing dynamics can be complex due to conversion features and investor expectations. Stabilisation can help mitigate abrupt price swings that may occur when a new issue begins trading.
At the same time, the exemption is deliberately narrow. It is limited to a specific bond issue, a specific stabiliser group, and a defined time window (30 days from issuance). It also restricts the exemption to dealings with persons within section 274 or sophisticated investors. These constraints are significant for enforcement and for market integrity: they ensure that the exemption cannot be used as a broad licence for price support or other potentially abusive trading strategies.
For practitioners advising issuers, arrangers, or stabilising agents, the Regulations provide a clear legal basis to structure stabilisation activities. The practical impact is that counsel can assess whether a stabilisation programme can proceed without breaching the SFA’s general market conduct prohibitions, provided the programme is documented and executed in compliance with the defined conditions.
Related Legislation
- Securities and Futures Act (SFA) (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 (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.