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
- Legislation Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Commencement: 9 January 2006
- Regulation Number: SL 16/2006
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (including “Bonds” and “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the Securities and Futures Act for specified stabilising action
- Status: Current version as at 27 March 2026
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 Action Exemption Regulations”) creates a targeted regulatory exemption within Singapore’s market conduct framework. In broad terms, the Securities and Futures Act (SFA) contains rules designed to prevent market manipulation and improper conduct in relation to securities and futures markets. Those rules can restrict certain trading activities that might otherwise be considered “market conduct” offences.
This subsidiary legislation addresses a specific market practice: stabilising action. Stabilisation is commonly used in bond and equity offerings to reduce price volatility immediately after issuance. Market participants may buy (or offer to buy) securities to support or maintain market price. While stabilisation can be legitimate, it also carries a risk of being misused to create an artificial market. Accordingly, the SFA generally regulates or prohibits conduct that could be characterised as manipulative or improper.
The Regulations therefore carve out a narrow exemption. They permit stabilising action in respect of a defined set of bonds—issued by United Phosphorus Limited—provided that the stabilising activity is carried out within a specified time window and by (or for) specified categories of counterparties, and that minimum consideration thresholds are met. The exemption is not general; it is bond-specific and tightly conditioned.
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
Regulation 1 sets the legal identity of the instrument and confirms that it came into operation on 9 January 2006. For practitioners, this matters when assessing whether stabilising trades were conducted within the regulatory period and whether the exemption was available at the relevant time.
2. Definitions (Regulation 2)
The Regulations’ operative effect depends heavily on its definitions. Three defined terms are central:
(a) “Bonds”: The Regulations define “Bonds” very specifically as 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. The bonds are convertible into new ordinary shares of United Phosphorus Limited with a par value of 2 Indian Rupees each. This specificity is crucial: the exemption is not available for other bonds, other issuers, or other maturities.
(b) “securities”: The term “securities” is imported by reference to section 239(1) of the SFA. This ensures that the exemption sits within the SFA’s broader definitional architecture.
(c) “stabilising action”: The Regulations define “stabilising action” as an action taken in Singapore or elsewhere by UBS AG 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 also restrictive: it ties stabilisation to UBS AG (and its related corporations), and it requires the purpose of stabilising or maintaining market price.
3. The exemption (Regulation 3)
The heart of the Regulations is Regulation 3. It provides that sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of the specified Bonds, within 30 days from the date of issue, but only if the stabilising action is taken with certain counterparties and meets a minimum consideration threshold.
Practically, this means that stabilising trades that would otherwise fall within the prohibitions or restrictions in sections 197 and 198 are permitted—but only if the conditions are satisfied.
The exemption applies to stabilising action taken with:
- (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, provided that 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.
Time limitation: The stabilising action must occur within 30 days from the date of issue. This is a classic stabilisation window: it allows early market support while limiting the duration during which stabilising conduct could distort price discovery.
Counterparty limitation: The exemption is not available for stabilising action in general. It is limited to transactions with institutional investors, “relevant persons,” or principal acquirers meeting the minimum consideration threshold. This reduces the risk that stabilisation is used to target retail or low-value counterparties where market integrity concerns may be higher.
Consideration threshold: For principal acquisitions, the Regulations require at least $200,000 per transaction (or equivalent). The threshold is flexible as to payment form: it may be paid in cash or by exchanging securities or other assets. This is important for structuring trades and ensuring that stabilisation counterparties and transaction documentation clearly evidence compliance.
Regulatory intent: By exempting stabilising action only for a defined bond and within a defined period and counterparty set, the Regulations balance market support with investor protection and anti-manipulation objectives.
How Is This Legislation Structured?
The Regulations are short and structured around three provisions:
- Regulation 1 (Citation and commencement): establishes the instrument’s name and effective date.
- Regulation 2 (Definitions): defines the scope-critical terms—“Bonds,” “securities,” and “stabilising action.” These definitions determine whether a particular trade qualifies for the exemption.
- Regulation 3 (Exemption): sets out the operative legal effect—disapplying sections 197 and 198 of the SFA to qualifying stabilising action, subject to time, counterparty, and consideration conditions.
From a practitioner’s perspective, the Regulations function as a targeted “permission” instrument: instead of creating new offences, it temporarily removes the application of existing SFA provisions for specified stabilisation conduct.
Who Does This Legislation Apply To?
The exemption is directed at stabilising action taken by UBS AG or its related corporations. Accordingly, the primary regulated actors are the entities conducting stabilising trades and those coordinating or executing them as part of the bond issuance process.
However, the exemption also depends on who the counterparty is. Regulation 3 conditions the exemption on stabilising action being taken with an institutional investor, a relevant person (as defined in the SFA), or a principal acquirer meeting the $200,000 per transaction minimum consideration requirement. Therefore, while the exemption is framed around the stabiliser’s conduct, it effectively governs the eligibility of counterparties for stabilisation trades.
Why Is This Legislation Important?
This instrument is important because it clarifies when stabilisation activity is legally permissible in Singapore’s market conduct regime. Without such an exemption, stabilising trades could be scrutinised as potentially prohibited conduct under the SFA—creating legal uncertainty for issuers, underwriters, and trading desks involved in bond offerings.
For practitioners advising on capital markets transactions, the Regulations provide a concrete compliance framework: the stabilisation must be (i) in respect of the specific defined bonds, (ii) undertaken by UBS AG or related corporations, (iii) within 30 days from the date of issue, and (iv) executed with eligible counterparties under the institutional/relevant person or $200,000 minimum consideration conditions. These elements are the compliance “checklist” that should be reflected in internal approvals, trade documentation, and post-trade recordkeeping.
From an enforcement perspective, the exemption’s narrow tailoring signals regulatory caution. Stabilisation is allowed, but only under conditions designed to limit manipulation risk. Lawyers should therefore treat the exemption as a conditional safe harbour rather than a broad permission: if any element is missing—wrong bond, wrong stabiliser, trades outside the 30-day window, or non-qualifying counterparties—the exemption would not apply, and the SFA provisions could become relevant.
Related Legislation
- Securities and Futures Act (Cap. 289) (including sections 197, 198, 239(1), 275(2), and the stabilising-related framework)
- Futures Act
- Stabilising Act
- Timeline (legislation timeline/versioning reference)
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.