Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2005
- Act Code: SFA2001-S37-2005
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (Cap. 289), specifically section 337(1)
- Commencement: 18 January 2005
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory Focus: Exemption from market conduct prohibitions for stabilising purchases/arrangements relating to specified bonds
- Instrument Number: SL 37/2005
- Made Date: 5 January 2005
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2005 (“Stabilising Exemption Regulations”) is a targeted regulatory instrument. In plain terms, it creates a limited legal “carve-out” that allows certain market participants to take stabilising actions in relation to a specific set of bonds without breaching specified market conduct provisions in the Securities and Futures Act (SFA).
Stabilising action is a market practice commonly associated with new issues. When bonds are first issued and begin trading, their prices can be volatile. Under the stabilisation regime, a stabilising manager may buy (or arrange to buy) the relevant bonds to help maintain orderly trading and reduce extreme price fluctuations. However, stabilising activity can also resemble conduct that market conduct rules seek to prevent—such as improper price manipulation or misleading market behaviour. The Regulations therefore reconcile these competing policy concerns by granting an exemption, but only if strict conditions are met.
Importantly, this is not a general stabilisation framework for all bonds. The Regulations are bond-specific and action-specific. They define “Bonds” narrowly (a particular zero coupon guaranteed exchangeable bond issue in January 2005) and define “stabilising action” narrowly (actions by UBS Limited or its related corporations). The exemption is also time-limited (within 30 days from the date of issue). This narrow drafting reflects the legislative intent: to permit stabilisation for a particular transaction while preserving the general integrity of the market conduct regime.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the legal identity of the instrument and its effective date. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2005” and came into operation on 18 January 2005. For practitioners, the commencement date matters because the exemption only becomes available once the Regulations are in force.
Section 2 (Definitions) is the core interpretive gateway. It defines two key terms: “Bonds” and “stabilising action”. The definition of “Bonds” is highly specific. It refers to zero coupon guaranteed exchangeable bonds issued by First Pacific Finance Limited in January 2005 with a principal amount of up to US$300 million. These bonds are guaranteed by First Pacific Company Limited and are exchangeable into existing shares in the capital of Philippine Long Distance Telephone Company Limited, with a par value of 5 Philippine Peso each.
The definition of “stabilising action” is equally narrow. It means an action taken in Singapore or elsewhere by UBS Limited (or any of its related corporations) to buy, or 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 significant for two reasons. First, it restricts the exemption to stabilisation activities undertaken by UBS Limited or its related corporations—other dealers or arrangers cannot rely on this exemption. Second, it covers not only actual purchases but also offers and agreements to buy, which can be relevant to how stabilisation is operationalised (for example, through conditional orders or contractual arrangements).
Section 3 (Exemption) 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, provided the stabilising action is taken with either of the following counterparties/participants: (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 text provided does not reproduce sections 197, 198, 274, and 275, the structure of the exemption is clear. The Regulations remove the application of particular market conduct prohibitions (sections 197 and 198) to stabilising action, but only when the stabilising activity occurs within the specified time window and only when the relevant counterparty falls within the defined categories. For a practitioner, this means the exemption is not automatic: it is conditional on both timing and who the stabilising trades are with.
From a compliance perspective, the 30-day limit is likely the most operationally important constraint. Stabilisation activity outside the 30-day period would fall back under the general SFA market conduct rules, exposing the stabilising manager and related parties to potential regulatory risk. Similarly, if stabilisation trades are executed with persons who do not qualify under section 274 or the “sophisticated investor” definition in section 275(2), the exemption may not apply even if the trades are within 30 days.
How Is This Legislation Structured?
The Regulations are concise and consist of an enacting formula and three substantive provisions:
Section 1 sets out citation and commencement. Section 2 provides definitions that control the scope of the instrument. Section 3 provides the exemption, specifying which SFA provisions are disapplied, the time period for stabilising action, the relevant bonds, and the qualifying persons (section 274 persons or sophisticated investors under section 275(2)).
There are no additional parts or schedules in the extract. The drafting approach is “minimalist”: the Regulations function as a transaction-specific exemption rather than a comprehensive stabilisation regime.
Who Does This Legislation Apply To?
In practical terms, the Regulations apply to stabilising actions relating to the defined “Bonds” and undertaken by the defined stabilising actor (UBS Limited or its related corporations). Therefore, the primary regulated parties are those who would execute or arrange stabilisation trades for this particular bond issue.
Additionally, the exemption’s conditional language means that the counterparty category matters. Stabilising action must be 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). This implies that even if UBS (or a related corporation) performs stabilisation within 30 days, the exemption may not protect trades conducted with non-qualifying counterparties.
Why Is This Legislation Important?
This instrument is important because it demonstrates how Singapore’s market conduct framework can accommodate legitimate market practices while maintaining regulatory safeguards. Stabilisation can support orderly trading during the initial period after issuance, but it can also create risks of misleading price signals. By disapplying specified SFA provisions only for a narrow set of circumstances, the Regulations allow stabilisation without undermining the broader prohibitions intended to prevent market abuse.
For practitioners advising issuers, underwriters, stabilising managers, or trading desks, the Regulations provide a clear legal pathway: stabilising action in respect of the specified bonds is exempt from sections 197 and 198, but only if the action is within the 30-day period from issue and is conducted with qualifying persons. This is the kind of “permission with conditions” that must be operationalised through trade documentation, counterparty onboarding, and monitoring of the stabilisation window.
From an enforcement and risk perspective, the narrowness of the exemption is a warning. Because the definitions are transaction-specific, firms cannot assume that general stabilisation practices will be covered. If the stabilisation relates to different bonds, involves a different stabilising manager, occurs outside the 30-day window, or is executed with non-qualifying counterparties, the exemption will likely not apply. In such cases, the general SFA market conduct provisions would remain relevant.
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 — referenced in the legislation metadata (contextual/related framework)
- Stabilising Act — referenced in the legislation metadata (contextual/related framework)
- Timeline — legislation timeline/versioning reference (as indicated in the 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. 2) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.