Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2006
- Act Code: SFA2001-S16-2006
- Type: Subsidiary Legislation (SL)
- Status: Current version as at 27 Mar 2026 (per provided extract)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting power: Section 337(1) of the Securities and Futures Act
- Commencement: 9 January 2006
- Key provisions: Section 2 (definitions); Section 3 (exemption)
- Enacting authority: Monetary Authority of Singapore (MAS)
- Regulation number: SL 16/2006 (dated 9 Jan 2006)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 2) Regulations 2006 (“Stabilising Exemption Regulations”) creates a targeted regulatory exemption from certain market conduct rules under the Securities and Futures Act (the “SFA”). In plain language, it allows specified parties to take “stabilising action” in relation to a particular bond issue without triggering the prohibitions that would otherwise apply.
The legislation is narrow in scope. It does not create a general exemption for all bonds or all stabilisation activities. Instead, it is tied to a defined set of “Bonds” (a specific 5-year fixed rate convertible bond issue by United Phosphorus Limited) and a defined concept of “stabilising action” (actions taken by UBS AG or its related corporations to buy, or offer or agree to buy, those bonds to stabilise or maintain their market price).
Practically, the Regulations recognise a common feature of capital markets: during and shortly after issuance, stabilisation may be used to reduce volatility and support orderly trading. However, stabilisation can also resemble conduct that market conduct rules seek to prevent (such as creating artificial prices). The exemption therefore balances market functioning with investor protection by limiting the exemption to a defined bond issue, a defined stabiliser, and a strict time window.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal citation and states that the Regulations come into operation on 9 January 2006. For practitioners, this matters because the exemption is time-bound and must be assessed against the commencement date and the issuance date of the relevant bonds.
Section 2 (Definitions) is central to the Regulations’ narrow scope. It defines three key terms:
- “Bonds”: the Regulations specify the exact instrument—the 5-year fixed rate convertible bonds due January 2011 issued by United Phosphorus Limited, for a principal amount of up to US$80 million, convertible into new ordinary shares with a par value of 2 Indian Rupees each. This precision means the exemption cannot be extended to other bond series, tranches, or issuers.
- “securities”: this adopts the meaning in section 239(1) of the SFA. While the Regulations are about bonds, the cross-reference ensures the term aligns with the SFA’s broader definition framework.
- “stabilising action”: this is defined as an action taken in Singapore or elsewhere by UBS AG (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. The definition is important because it captures not only actual purchases but also offers or agreements to purchase—conduct that may be relevant to market conduct analysis.
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 one of the following categories of counterparties:
- (a) an institutional investor;
- (b) a “relevant person” as defined in section 275(2) of the SFA;
- (c) a person who acquires the Bonds as principal, but only where the consideration for the acquisition is not less than $200,000 (or its equivalent in a foreign currency) for each transaction—whether paid in cash or by exchange of securities or other assets.
In effect, Section 3 creates a conditional safe harbour: stabilising action by UBS AG (or related corporations) is exempt from the SFA’s market conduct prohibitions only if (i) it is in relation to the specified bonds, (ii) it occurs within the 30-day post-issuance window, and (iii) the counterparty falls within one of the specified categories and, for principal acquisitions, meets the minimum consideration threshold.
Key practical implications of the Section 3 conditions:
- Time limitation (30 days from issue): stabilisation outside the window would not benefit from the exemption. Lawyers should ensure deal documentation and trading records can demonstrate the timing of stabilising purchases/offers relative to the “date of issue”.
- Counterparty limitation: the exemption is not “any buyer”. It is limited to institutional investors, relevant persons, or principal acquirers meeting the $200,000 minimum consideration per transaction.
- Transaction value threshold: for principal acquisitions, the minimum consideration requirement is a quantitative gate. The Regulations also clarify that the threshold may be satisfied by cash or by exchange of securities or other assets, which is relevant for structured settlement arrangements.
How Is This Legislation Structured?
The Regulations are structured as a short instrument with three substantive provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that determine the scope of “Bonds” and “stabilising action”, and incorporates the SFA’s definition of “securities”.
- Section 3 contains the exemption from specified SFA provisions (sections 197 and 198), subject to the time window and counterparty conditions.
Notably, the Regulations do not include detailed procedural requirements (such as reporting, disclosure, or limits on stabilisation volume) within the text provided. Instead, the exemption operates by removing the application of the SFA’s specified sections to qualifying stabilising action. In practice, lawyers should still consider whether other regulatory requirements (including prospectus disclosures, MAS guidance, or other SFA provisions) apply alongside this exemption.
Who Does This Legislation Apply To?
The exemption is directed at stabilising action in respect of the defined bond issue. The definition of “stabilising action” specifies that the stabilising activity is carried out by UBS AG or its related corporations. Accordingly, the exemption is most relevant to the stabilising manager and its corporate group entities that conduct stabilisation trades.
However, the exemption’s effect also depends on the counterparty to the stabilising trades. Section 3 limits the exemption to stabilising action involving (i) institutional investors, (ii) relevant persons under the SFA, or (iii) principal acquirers meeting the minimum consideration threshold. Therefore, the Regulations indirectly affect issuers, underwriters, and trading desks by shaping which counterparties can be used for stabilisation trades if the parties want the exemption to apply.
Why Is This Legislation Important?
This Regulations is important because it provides a narrowly tailored legal basis for market stabilisation in a specific bond transaction. Without such an exemption, stabilising purchases or offers to purchase could potentially fall within the prohibitions in sections 197 and 198 of the SFA (which, in general terms, are designed to prevent improper market conduct and manipulation-like behaviour). By carving out qualifying stabilising action, the Regulations enable stabilisation strategies that are commonly used in bond offerings while maintaining regulatory control.
From a practitioner’s perspective, the value lies in the precision of the conditions. The exemption is not open-ended: it is limited to a specific bond issue, a defined stabiliser (UBS AG and related corporations), and a strict post-issuance period of 30 days. It also imposes counterparty constraints and a $200,000 minimum consideration threshold for principal acquisitions. These features make the Regulations highly relevant for compliance planning, trade approvals, and evidence gathering.
In enforcement and audit contexts, the Regulations’ conditional nature means that documentation is critical. Lawyers advising on stabilisation programmes should ensure that trading records, counterparty classifications (institutional investor vs relevant person vs principal acquirer), and transaction values can be mapped to the statutory criteria. Where stabilisation is conducted “in Singapore or elsewhere,” cross-border execution adds another layer: the exemption’s definition contemplates actions outside Singapore, but the legal analysis still turns on whether the action qualifies as “stabilising action” and whether the Section 3 conditions are satisfied.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular:
- Section 337(1) (authorising power for MAS to make regulations)
- Sections 197 and 198 (market conduct provisions from which the exemption applies)
- Section 239(1) (definition of “securities”)
- Section 275(2) (definition of “relevant person”)
- Futures Act (referenced in the provided metadata context)
- Stabilising Act (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. 2) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.