Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 17) Regulations 2005
- Act Code: SFA2001-S545-2005
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (notably section 337(1))
- Legislative Instrument No.: SL 545/2005
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 17) Regulations 2005
- Commencement: 17 August 2005
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
- Relevant SFA Provisions Exempted: Sections 197 and 198 of the Securities and Futures Act
- Stabilising Action Time Window: Within 30 days from the date of issue of the Bonds
- Beneficiaries/Counterparties: Persons referred to in section 274 of the SFA; or sophisticated investors as defined in section 275(2) of the SFA
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 17) Regulations 2005 (“Stabilising Action Exemption Regulations”) is a targeted regulatory instrument. In plain terms, it creates a limited exemption from certain market conduct restrictions in the Securities and Futures Act (SFA) for stabilising purchases or offers made in relation to a specific bond issuance.
Stabilising action is a practice commonly used in capital markets. When a new bond is issued, market makers or arrangers may take steps to support liquidity and reduce volatility in the immediate aftermath of issuance. However, stabilising activity can resemble conduct that market conduct rules are designed to prevent—such as manipulative trading or misleading price formation. Accordingly, the SFA contains prohibitions and controls aimed at protecting market integrity.
This Regulations package balances those competing interests. It authorises stabilising action in a narrow set of circumstances—limited to a defined bond, a defined stabiliser (Goldman Sachs (Singapore) Pte. and related corporations), a defined time period (30 days from issue), and defined categories of counterparties (persons under section 274 or sophisticated investors under section 275(2) of the SFA). The result is a “safe harbour” that allows stabilisation while keeping it tightly bounded.
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
The Regulations may be cited by their full name and come into operation on 17 August 2005. For practitioners, this matters primarily for compliance timing: any stabilising activity seeking to rely on the exemption must fall within the legal framework in force at the relevant time.
2. Definitions (Regulation 2)
The Regulations define two core terms: “Bonds” and “stabilising action”. The definition of “Bonds” is highly specific. It refers to 5-year fixed rate amortising bonds due August 2010 issued by Chartered Semiconductor Manufacturing Ltd for a principal amount of up to US$75 million. Crucially, the bonds are defined as being sold together with one of the 5-year convertible redeemable preference shares due August 2010 issued by the same issuer for a principal amount of up to US$500 million. This indicates that the exemption is not generic; it is tied to a particular structured issuance.
The definition of “stabilising action” is also narrow. It means an action taken in Singapore or elsewhere by Goldman Sachs (Singapore) Pte. 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. The inclusion of “offer or agree to buy” is significant: it captures not only completed purchases but also conditional or forward commitments that may affect market expectations and trading behaviour.
3. The exemption from SFA sections 197 and 198 (Regulation 3)
The heart of the Regulations is Regulation 3. It provides 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, provided the stabilising action is taken 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.
While the extract does not reproduce the text of SFA sections 197 and 198, the legal effect is clear: the Regulations carve out stabilising action from the reach of those prohibitions/requirements. For a practitioner, the practical compliance task is to confirm that all conditions are satisfied simultaneously: (i) the instrument is within the defined “Bonds”; (ii) the activity qualifies as “stabilising action” by the defined stabiliser; (iii) the timing is within 30 days from issue; and (iv) the counterparty is within the permitted categories.
4. Counterparty limitation and investor protection logic
The counterparty restriction is a key safeguard. By limiting stabilising action to transactions with persons under section 274 or sophisticated investors, the Regulations reduce the risk that retail or less-informed investors are exposed to price support practices without appropriate protections. In practice, firms relying on the exemption should ensure robust investor classification processes and evidence of eligibility (e.g., documentation supporting “sophisticated investor” status under section 275(2), and identification of whether a counterparty falls within section 274).
How Is This Legislation Structured?
The Regulations are structured in a straightforward, three-regulation format:
- Regulation 1 (Citation and commencement) sets the name and commencement date.
- Regulation 2 (Definitions) defines “Bonds” and “stabilising action”, which are essential to determining whether the exemption can be invoked.
- Regulation 3 (Exemption) states the operative exemption, including the time limit (30 days from issue) and the permitted counterparties.
There are no additional parts or schedules in the extract. The instrument is therefore best understood as a narrowly tailored exemption regulation rather than a comprehensive market conduct code.
Who Does This Legislation Apply To?
Although the exemption is framed as applying to “stabilising action” in respect of the defined Bonds, its practical application is directed at the entities that may conduct such stabilising activity. The definition of “stabilising action” identifies the relevant stabiliser: Goldman Sachs (Singapore) Pte. and its related corporations. Accordingly, the exemption is effectively available only to stabilising conduct by that group (or those related corporations acting within the definition).
In addition, the exemption is conditional on the identity of the counterparty. Stabilising action must be taken “with” either a person referred to in section 274 of the SFA or with a sophisticated investor under section 275(2). This means that even if the stabiliser and the instrument and timing are correct, the exemption will not apply if the stabilising trades are executed with ineligible counterparties.
Why Is This Legislation Important?
This Regulations instrument is important for market participants because it clarifies when stabilising conduct can occur without triggering certain SFA market conduct provisions. For issuers, arrangers, and trading desks, the ability to stabilise can be commercially significant—particularly in the early period after issuance when liquidity and price discovery are most fragile.
From a legal risk perspective, the exemption reduces uncertainty. Without such an exemption, stabilising purchases or offers could be argued to fall within prohibitions in sections 197 and 198 of the SFA. By carving out the specified conduct, the Regulations provide a compliance pathway: firms can structure stabilising activities to fit within the defined safe harbour.
Practically, the Regulations also highlight the importance of documentation and controls. Because the exemption is time-bound (30 days from issue) and counterparty-bound (section 274 persons or sophisticated investors), firms should implement systems to: (i) track the issuance date and stabilisation window; (ii) monitor whether trades relate to the defined Bonds (including the structured linkage to preference shares); (iii) ensure the stabiliser is within the defined corporate group; and (iv) verify counterparty eligibility and retain evidence.
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 platform metadata)
- Stabilising Act (as referenced in the platform metadata)
- Legislation Timeline (for version control and amendment history)
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. 17) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.