Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 18) Regulations 2004
- Act Code: SFA2001-S580-2004
- Legislative Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Power Used: Section 337(1) of the Securities and Futures Act
- Enactment Date: 8 September 2004
- Commencement: 15 September 2004
- Regulation Number: SL 580/2004
- Status: Current version as at 27 March 2026 (per the provided extract)
- Key Provisions: Regulation 1 (Citation and commencement), Regulation 2 (Definitions), Regulation 3 (Exemption)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 18) Regulations 2004 (“Stabilising Action Exemption Regulations”) is a targeted set of subsidiary regulations made under the Securities and Futures Act (SFA). In plain language, it creates a narrow exemption from certain market conduct rules when a stabilising party undertakes stabilising purchases (or offers to purchase) of a specific bond issue shortly after it is launched.
Market conduct rules in the SFA are designed to prevent manipulative or misleading trading practices and to promote fair and orderly markets. However, stabilisation is a recognised market practice in some bond and securities offerings: a stabilising manager may buy (or commit to buy) securities to support the market price during the early trading period, typically to reduce volatility caused by initial supply and demand imbalances.
This legislation does not broadly authorise stabilisation. Instead, it carves out an exemption for stabilising action taken in respect of a particular bond—defined with precision in the regulations—and only within a defined time window after issuance. It also limits who may be involved, by reference to specific categories of persons under the SFA (including “sophisticated investors”).
What Are the Key Provisions?
Regulation 1: Citation and commencement. Regulation 1 provides the short title and sets the commencement date. The regulations “may be cited as” the Stabilising Action Exemption Regulations and come into operation on 15 September 2004. For practitioners, this matters when assessing whether a stabilising action falls within the regulatory framework applicable at the time of the relevant trades or offers.
Regulation 2: Definitions (Bonds and stabilising action). Regulation 2 is critical because the exemption is tightly tied to the defined instruments and defined conduct. The regulations define:
- “Bonds” as the “guaranteed fixed rate convertible bonds due September 2009” issued by Commerce Capital (Labuan) Ltd (up to US$125 million), guaranteed by Commerce Asset-Holding Berhad, and convertible into new ordinary shares of Commerce Asset-Holding Berhad (with a par value of 1 Malaysian Ringgit each).
- “stabilising action” as an action taken in Singapore or elsewhere by Morgan Stanley & Co. International 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.
Two practical points follow from these definitions. First, the exemption is instrument-specific: it applies only to the Commerce Capital (Labuan) Ltd convertible bond issue described. Second, the exemption is conduct-specific and actor-specific: it is limited to stabilising actions undertaken by Morgan Stanley & Co. International Limited or its related corporations, and only where the purpose is to stabilise or maintain the market price.
Regulation 3: The exemption from Sections 197 and 198 of the Act. Regulation 3 is the operative provision. It states that Sections 197 and 198 of the SFA shall not apply to any stabilising action taken in respect of any of the Bonds, within 30 days from the date of issue of the Bonds, provided the stabilising action is taken with a person falling within one of two categories:
- (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.
In effect, the regulations create a time-limited and counterparty-limited exemption. The stabilising activity must occur within the first 30 days after issuance, and the trades/offers must be conducted with eligible counterparties as defined by the SFA. This is a typical regulatory design: it permits stabilisation to support orderly trading during the initial period, while reducing the risk of broader market manipulation.
What does “Sections 197 and 198” mean in practice? While the provided extract does not reproduce the text of Sections 197 and 198, the structure indicates that these sections contain market conduct restrictions that would otherwise apply to trading or dealing activities. The exemption means that, for the specified stabilising action, the regulatory prohibitions or requirements in those sections are inapplicable. For a practitioner, the key task is to map the stabilising conduct to the elements of the exemption: (i) the instrument is within the defined “Bonds”; (ii) the action qualifies as “stabilising action” (including the actor and purpose); (iii) it occurs within the 30-day period; and (iv) the counterparty is within section 274 or is a sophisticated investor under section 275(2).
How Is This Legislation Structured?
The regulations are short and structured around three provisions:
- Regulation 1 sets out the citation and commencement.
- Regulation 2 provides definitions that determine the scope of the exemption—particularly the definition of “Bonds” and “stabilising action”.
- Regulation 3 contains the exemption itself, specifying the sections of the SFA that are disapplied, the time limit (30 days from issue), and the eligible counterparties (persons under section 274 or sophisticated investors under section 275(2)).
There are no additional parts or schedules in the extract, reflecting the regulations’ purpose as a bespoke exemption for a particular bond offering and stabilisation arrangement.
Who Does This Legislation Apply To?
The exemption is designed to benefit the stabilising party and its related corporations—specifically, Morgan Stanley & Co. International Limited and its related corporations—when they undertake stabilising actions in relation to the defined Commerce Asset-Holding Berhad convertible bonds. However, the exemption is not unconditional: it applies only when the stabilising action is taken “with” a person in the categories specified by the SFA (section 274 persons or sophisticated investors under section 275(2)).
Accordingly, the practical applicability is twofold. First, the actor must be the stabilising manager (Morgan Stanley & Co. International Limited or related corporations) acting within the defined meaning of stabilising action. Second, the counterparty must be an eligible person. This means that even if stabilising purchases are made, the exemption may not apply if the trades are executed with counterparties outside the permitted categories.
Why Is This Legislation Important?
This legislation is important because it demonstrates how Singapore’s market conduct framework balances two competing objectives: preventing abusive or manipulative trading, and allowing legitimate stabilisation practices that can facilitate orderly market functioning during security issuance. Without an exemption, stabilising trades could potentially fall within the prohibitions or regulatory restrictions in Sections 197 and 198 of the SFA, creating legal uncertainty for stabilising managers.
For practitioners advising issuers, underwriters, or stabilising managers, the regulations provide a clear compliance pathway. The exemption is narrow, but it is also workable: it specifies the exact bond issue, the stabilising actor, the stabilising purpose, the geographic scope (“in Singapore or elsewhere”), the time window (30 days), and the eligible counterparties. These elements allow counsel to structure stabilisation programmes, trade documentation, and execution processes to ensure that the exemption is properly engaged.
From an enforcement and risk perspective, the time limit and counterparty limitation are particularly significant. Stabilisation outside the 30-day period, or stabilising trades with ineligible counterparties, could expose parties to the operation of the underlying market conduct provisions that the exemption disapplies. Therefore, legal review typically focuses on: (i) the issuance date and the calculation of the 30-day period; (ii) whether the trades are genuinely “stabilising action” (including the intent/purpose); (iii) whether the stabilising manager and its related corporations are the relevant actors; and (iv) whether the counterparty documentation and execution venues align with section 274 or the sophisticated investor definition in section 275(2).
Related Legislation
- Securities and Futures Act (Cap. 289) — including Sections 197, 198, 274, 275(2), and the regulation-making power in Section 337(1).
- Futures Act (as referenced in the provided metadata context).
- Stabilising Act (as referenced in the provided metadata context).
- Legislation Timeline / Document Timeline (as referenced in the provided metadata context).
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. 18) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.