Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 22) Regulations 2004
- Act Code: SFA2001-S683-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting power: Section 337(1) of the Securities and Futures Act
- Legal citation: SL 683/2004
- Commencement: 9 November 2004
- Status: Current version as at 27 March 2026 (per provided extract)
- Key provisions: Section 1 (Citation and commencement); Section 2 (Definitions); Section 3 (Exemption)
- Regulatory focus: Exemption from market conduct restrictions for stabilising actions in relation to specified bonds
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 22) Regulations 2004 (“Stabilising Action Exemption Regulations”) is a targeted regulatory instrument made under the Securities and Futures Act (“SFA”). In plain language, it creates a narrow exemption allowing certain market participants to engage in “stabilising action” in connection with a specific issuance of bonds, without being treated as breaching the market conduct provisions that would otherwise apply.
Stabilisation is a common feature of securities offerings. When new bonds are issued, there can be volatility in trading prices as the market absorbs the new instrument. Stabilising activity—typically buying (or offering to buy) the bonds during a limited period—aims to support or maintain orderly market conditions. However, stabilisation can also resemble prohibited trading practices if not carefully constrained. The SFA therefore contains market conduct rules that restrict certain dealings, and this subsidiary legislation carves out an exemption for stabilising action, but only if strict conditions are met.
Importantly, the Regulations are not a general stabilisation regime for all bonds. They are bond-specific and action-specific. The exemption applies only to “the Bonds” defined in the Regulations (a particular 5-year zero coupon convertible bond issuance by CMC Magnetics Corporation) and only to stabilising actions taken within a defined timeframe after issue. The exemption also depends on who the stabilising counterparty is—either a person specified by the SFA or a “sophisticated investor” as defined in the SFA.
What Are the Key Provisions?
Section 1: Citation and commencement. Section 1 provides the short title and states that the Regulations come into operation on 9 November 2004. For practitioners, this matters because the exemption is tied to the issuance and the “within 30 days from the date of issue” condition in Section 3. The commencement date confirms the regulatory framework was in place for the relevant offering period.
Section 2: Definitions (the scope-limiting mechanism). Section 2 defines two critical terms: “Bonds” and “stabilising action.” The definition of “Bonds” is highly specific. It refers to “the 5-year zero coupon convertible bonds due October 2009” issued by CMC Magnetics Corporation in October 2004, with a principal amount “up to US$200 million.” It also specifies the conversion mechanics: the bonds are convertible into ordinary shares of CMC Magnetics Corporation (par value NT$10 each) or, at the option of converting bondholders, global depositary receipts where each receipt represents 20 ordinary shares.
This level of detail is not merely descriptive—it is jurisdictional and evidential. A stabilising trader seeking to rely on the exemption must be able to show that the instrument being dealt with is exactly the “Bonds” described. If the stabilising activity relates to different tranches, different maturities, different issuers, or different conversion terms, the exemption would likely not apply.
Section 2 also defines “stabilising action” as an action taken in Singapore or elsewhere by J.P. Morgan Securities Ltd. (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 equally restrictive: it limits the exemption to stabilisation conducted by a specified firm (and its related corporations) and to actions that are directed at stabilising or maintaining market price.
Section 3: The exemption from Sections 197 and 198 of the SFA. Section 3 is the operative provision. It states 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, with respect to dealings with either:
- (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 practical terms, this means the stabilising activity is carved out from the prohibitions or restrictions contained in Sections 197 and 198, but only if all conditions are satisfied: (i) the action qualifies as “stabilising action” under the definition; (ii) it relates to the specified “Bonds”; (iii) it occurs within the 30-day post-issue window; and (iv) the counterparty is within the permitted categories (Section 274 persons or sophisticated investors).
For a lawyer advising a stabilising agent or the issuer, the most important compliance work typically lies in proving these conditions. The 30-day limitation requires careful trade-date and settlement-date analysis, depending on how the market conduct provisions are interpreted in enforcement practice. The counterparty condition requires documentation of the counterparty’s status—particularly where “sophisticated investor” status is involved, which generally requires meeting statutory criteria and maintaining appropriate records.
Finally, the exemption is framed as “Sections 197 and 198… shall not apply.” This drafting approach suggests that the stabilising action is not merely permitted as a matter of discretion; rather, it is legally excluded from the scope of those particular prohibitions. That distinction can be significant in enforcement contexts, where regulators may otherwise argue that trading conduct falls within the mischief of the market conduct rules.
How Is This Legislation Structured?
The Regulations are structured in a simple, three-section format:
- Section 1 sets out the citation and commencement date.
- Section 2 provides definitions that precisely identify the relevant bonds and the permitted stabilising activity (including the stabilising firm).
- Section 3 contains the exemption, specifying the SFA provisions excluded, the time window (30 days from issue), and the permitted counterparty categories (Section 274 persons or sophisticated investors).
There are no additional parts or schedules in the provided extract, reflecting the Regulations’ function as a narrow, transaction-specific exemption instrument rather than a broad regulatory framework.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA and refer to market conduct provisions, their practical application is directed at the parties conducting stabilising activity in relation to the specified bonds. The definition of “stabilising action” restricts the exemption to actions taken by J.P. Morgan Securities Ltd. or its related corporations. Accordingly, the exemption is primarily relevant to that stabilising agent and any related entities acting in concert or within the corporate group.
However, the exemption also depends on the identity of the counterparty. Section 3 permits stabilising actions only when the stabilising dealings are with a person referred to in Section 274 of the SFA or with a “sophisticated investor” under Section 275(2). Therefore, the Regulations indirectly affect issuers, arrangers, and trading desks because they must ensure that stabilisation is executed through compliant counterparties and with adequate evidence of status.
Why Is This Legislation Important?
This subsidiary legislation is important because it illustrates how Singapore’s market conduct framework balances two competing objectives: (1) maintaining fair and orderly markets by restricting certain trading behaviours, and (2) allowing legitimate market practices such as stabilisation during an offering period. By granting a narrowly tailored exemption, the Regulations reduce legal uncertainty for stabilising agents while still imposing meaningful constraints.
From an enforcement and compliance perspective, the Regulations are also a reminder that exemptions in financial regulation are typically conditional. The exemption is not open-ended; it is time-limited (30 days from issue), instrument-specific (the defined CMC Magnetics convertible bonds), and participant-specific (J.P. Morgan Securities Ltd. and related corporations). In practice, these constraints require robust internal controls: pre-trade checks to confirm the instrument and the trading purpose; post-trade monitoring to ensure trades fall within the permitted window; and counterparty due diligence to confirm eligibility under Section 274 or sophisticated investor criteria.
For practitioners advising on bond offerings, the Regulations can be used as a template for how stabilisation exemptions may be structured: regulators may permit stabilising activity where it is clearly defined, limited in duration, and confined to particular counterparties. It also highlights the need to read subsidiary legislation alongside the parent Act provisions it modifies—here, Sections 197 and 198 of the SFA—because the exemption’s value depends on understanding the underlying prohibitions.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly Sections 197, 198, 274, 275(2), and the regulation-making power in Section 337(1)
- Stabilising Act (as referenced in provided metadata; exact title/identity not reproduced in the extract)
- Futures Act (as referenced in provided metadata; exact title/identity not reproduced in the extract)
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. 22) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.