Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 13) Regulations 2005
- Act Code: SFA2001-S486-2005
- Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (specifically, powers under section 337(1))
- Enacting authority: Monetary Authority of Singapore (MAS)
- Citation: SL 486/2005
- Commencement: 26 July 2005
- Key provisions: Section 2 (definitions); Section 3 (exemption)
- Relevant SFA provisions referenced: Sections 197 and 198 (market conduct restrictions); Sections 274 and 275(2) (categories of persons/investors); Section 337(1) (regulatory power)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 13) Regulations 2005 is a targeted regulatory instrument. In plain language, it creates a limited exemption from certain “market conduct” rules in the Securities and Futures Act (SFA) for stabilising activity conducted in relation to a specific bond issue.
Stabilising action is a common feature of certain bond and securities offerings. Market stabilisation typically involves regulated participants taking steps to support or maintain the trading price of newly issued securities during an initial period after issuance. The policy rationale is to reduce volatility and support orderly trading, while still preserving investor protection and market integrity.
This particular set of Regulations is narrow in scope: it applies only to stabilising action involving a defined class of “Bonds” (the Quanta Computer Inc. 5-year zero rate convertible bonds due July 2010) and only within a defined timeframe (within 30 days from the date of issue). It also restricts the counterparties to specified categories of persons (persons under section 274 of the SFA or “sophisticated investors” under section 275(2)).
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states when they come into operation. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 13) Regulations 2005” and they commenced on 26 July 2005. For practitioners, commencement matters because the exemption is time-bound and must be assessed against the date of the stabilising activity.
Section 2 (Definitions) is critical because it determines the boundaries of the exemption. Two defined terms drive the scope:
(1) “Bonds” are defined very specifically as the 5-year zero rate convertible bonds due July 2010 issued by Quanta Computer Inc. for a principal amount of up to US$250 million, convertible into common shares of Quanta Computer Inc. with a par value of NT$10 each. This definition is not generic; it is tied to a particular issuer, instrument, maturity, conversion feature, and issuance size.
(2) “stabilising action” is defined as an action taken in Singapore or elsewhere by Citigroup Global Markets 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 definition is equally restrictive: it identifies the stabilising entity (Citigroup Global Markets Limited and related corporations) and limits the permitted conduct to buying (including offers or agreements to buy) for stabilisation purposes.
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 respect to dealings with either:
- (a) a person referred to in section 274 of the SFA; or
- (b) a sophisticated investor as defined in section 275(2) of the SFA.
From a practitioner’s perspective, the exemption has three main “gates” that must all be satisfied:
- Instrument gate: the activity must be in respect of the defined “Bonds” (the Quanta convertible bonds).
- Conduct gate: the activity must fall within the defined “stabilising action” (Citigroup Global Markets Limited or related corporations buying/agreeing to buy for stabilisation).
- Time and counterparty gates: it must occur within 30 days from the date of issue, and it must be undertaken with counterparties that are either within the section 274 category or are sophisticated investors under section 275(2).
Although the Regulations do not reproduce the text of Sections 197 and 198, the legal effect is clear: the stabilising action is carved out from the application of those SFA market conduct restrictions. In practice, this means that conduct which might otherwise be prohibited or restricted under those sections is permitted (or at least not caught) when it meets the exemption conditions.
Practical compliance point: because the exemption is conditional, parties should document (i) the date of issue, (ii) the stabilisation period (ensuring actions are within 30 days), (iii) the identity and role of the stabilising entity (Citigroup Global Markets Limited or related corporations), (iv) the nature of the instrument (confirming the exact bond issue), and (v) the counterparty classification (section 274 person or sophisticated investor under section 275(2)).
How Is This Legislation Structured?
The Regulations are structured in a straightforward manner with a short set of provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that delimit the scope of “Bonds” and “stabilising action”.
- Section 3 contains the exemption from the application of specified SFA provisions (Sections 197 and 198) for stabilising action meeting the defined conditions.
There are no additional parts or complex procedural requirements in the extract provided. The legal work therefore focuses on interpreting the defined terms and ensuring factual alignment with the exemption conditions.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA and relate to “market conduct”, their application is functionally limited to the stabilising activity described in the definitions and exemption. The exemption is designed for the stabilising dealer and its related corporations—specifically, Citigroup Global Markets Limited (and related corporations) acting in connection with the defined Quanta bonds.
However, the exemption also depends on who the stabilising trades are with. Stabilising action must be conducted with either (i) a person referred to in section 274 of the SFA, or (ii) a sophisticated investor under section 275(2). This means that even if the stabilising entity and instrument match, the exemption may fail if the counterparty does not fall within the permitted categories.
Why Is This Legislation Important?
This Regulations is important because it demonstrates how Singapore’s market conduct framework accommodates legitimate market stabilisation while still maintaining regulatory control. Stabilisation can be controversial if it blurs the line between orderly price support and improper market manipulation. By carving out stabilising action from specific SFA provisions, MAS provides legal certainty to market participants—but only within tightly defined boundaries.
For practitioners, the key significance lies in the precision of the exemption. The Regulations are not a blanket permission for stabilisation in general. Instead, they are tailored to a particular bond issue and a particular stabilising dealer, and they impose a 30-day window and counterparty eligibility requirements. This structure reduces regulatory ambiguity and helps ensure that stabilisation is confined to the early post-issuance period when price discovery is still developing.
From an enforcement and risk-management perspective, the conditional nature of the exemption means that compliance failures can have serious consequences. If stabilising trades fall outside the 30-day period, involve a different instrument, are executed by an entity not covered by the definition, or are made with counterparties outside the permitted categories, the exemption would not apply. In that scenario, the stabilising activity could be assessed under the underlying SFA provisions (Sections 197 and 198), which are expressly excluded only when the Regulations’ conditions are met.
Related Legislation
- Securities and Futures Act (SFA) (Cap. 289) — in particular, Sections 197, 198, 274, 275(2), and 337(1)
- Futures Act (as referenced in the platform metadata)
- Stabilising Act (as referenced in the platform 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. 13) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.