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)
- Authorising Provision: Section 337(1) of the Securities and Futures Act
- Legislative Instrument No.: SL 683/2004
- Date Made: 7 November 2004
- Commencement: 9 November 2004
- Status: Current version as at 27 March 2026 (per the provided extract)
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
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 Exemption Regulations”) is a targeted regulatory instrument. In plain terms, it creates a narrow exemption from certain market conduct rules in the Securities and Futures Act (“SFA”) for a specific type of trading activity—“stabilising action”—carried out in relation to a particular bond issuance.
Market conduct rules in the SFA are designed to prevent manipulation and improper conduct in securities markets. However, in many bond and capital market transactions, market stabilisation practices are sometimes used to support orderly trading and reduce volatility immediately after issuance. The law therefore allows carefully circumscribed stabilisation, but only where the regulator is satisfied that the activity is legitimate and limited in scope.
This set of Regulations does not establish stabilisation rules from scratch. Instead, it uses the SFA’s exemption-making power to disapply (i.e., remove) the application of specific SFA provisions—sections 197 and 198—for stabilising action in respect of defined “Bonds”, within a defined time window, and when the stabilising action is carried out by defined categories of persons.
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
Regulation 1 provides the short title and commencement date. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 22) Regulations 2004” and came into operation on 9 November 2004. For practitioners, this matters because the exemption is only available for stabilising action taken after the Regulations commenced (subject to the Regulations’ own time limits for the stabilising activity).
2. Definitions (Regulation 2)
Regulation 2 is crucial because it tightly constrains what is covered. Two defined terms drive the scope: “Bonds” and “stabilising action”.
“Bonds” are defined with unusual specificity: they are the 5-year zero coupon convertible bonds due October 2009 issued by CMC Magnetics Corporation in October 2004 for a principal amount of up to US$200 million. The bonds are convertible into either:
- ordinary shares of CMC Magnetics Corporation with a par value of NT$10 each; or
- at the option of converting bondholders, global depositary receipts where each receipt represents 20 ordinary shares of CMC Magnetics Corporation with a par value of NT$10 each.
This definition makes the exemption transaction-specific. It is not a general stabilisation exemption for all bonds; it is limited to this particular issuance and its specified conversion mechanics.
“stabilising action” is also defined narrowly. It means 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. The definition therefore contains three elements practitioners should note:
- Actor: J.P. Morgan Securities Ltd. or its related corporations.
- Conduct: buying (or offering/agreement to buy).
- Purpose: stabilising or maintaining market price.
This is a functional definition: the exemption is tied to stabilisation intent and conduct, not merely to any trading activity.
3. The exemption from sections 197 and 198 (Regulation 3)
The operative provision is Regulation 3. It provides that sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of any of the Bonds, within 30 days from the date of issue of the Bonds, with stabilising action carried out with one of the following counterpart 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.
For a lawyer, the key practical takeaway is that the exemption is not “blanket” even for stabilising action. It is conditional on:
- Time: stabilising action must be taken within 30 days from the date of issue of the Bonds.
- Counterparty category: the stabilising action must involve a person within the SFA’s defined categories—either those referenced in section 274 or sophisticated investors under section 275(2).
- Instrument and actor: the action must fall within the defined “Bonds” and “stabilising action” definitions in Regulation 2.
Although the extract does not reproduce sections 197 and 198, the structure indicates that those sections impose market conduct constraints that would otherwise apply to dealing/trading in the relevant bonds. The Regulations effectively carve out a compliance pathway: if the stabilising activity meets the definitional and conditional requirements, the specified SFA provisions do not apply.
4. Making and authority
The Regulations were made by the Monetary Authority of Singapore (“MAS”) on 7 November 2004 and signed by Koh Yong Guan, Managing Director of MAS. This is relevant for practitioners verifying the instrument’s validity and the regulator’s exercise of the statutory exemption power under section 337(1) of the SFA.
How Is This Legislation Structured?
The Regulations are short and structured as a standard subsidiary legislative instrument with an enacting formula and a small number of substantive provisions:
- Regulation 1 (Citation and commencement): sets the short title and commencement date.
- Regulation 2 (Definitions): defines “Bonds” and “stabilising action”, which are the two core scope-limiting terms.
- Regulation 3 (Exemption): provides the exemption from the application of SFA sections 197 and 198, subject to the 30-day period and the counterparty categories (section 274 persons or sophisticated investors).
Notably, the instrument is highly targeted: it does not contain broad regulatory frameworks, reporting requirements, or detailed stabilisation mechanics. Instead, it relies on the SFA’s existing architecture and only removes the application of specified provisions for a defined transaction and stabilisation activity.
Who Does This Legislation Apply To?
In practical terms, the Regulations apply to parties involved in stabilising dealings in the defined CMC Magnetics convertible bonds. The exemption is available only for stabilising action taken by J.P. Morgan Securities Ltd. or its related corporations (as defined in Regulation 2). Therefore, the primary “regulated” party for the purposes of the exemption is the stabilising dealer and its corporate group.
Additionally, the exemption is conditioned on the stabilising action being taken with counterparties who fall within the SFA’s defined categories—either persons referred to in section 274 or sophisticated investors under section 275(2). This means that even where the stabilising dealer trades within the 30-day window, the exemption may not apply if the counterparty does not meet the statutory category requirements.
Why Is This Legislation Important?
This instrument is important because it demonstrates how Singapore’s market conduct regime balances two competing objectives: (1) preventing market manipulation and improper dealing, and (2) permitting legitimate market stabilisation in connection with capital market transactions.
For practitioners, the Regulations provide a compliance “safe harbour” (or more precisely, a statutory exemption) for stabilising activity that would otherwise be caught by SFA provisions dealing with market conduct. The exemption is narrow and time-bound, which is typical for stabilisation exemptions: stabilisation is generally permitted only in the immediate post-issuance period when market price discovery may be fragile.
From a transaction and legal risk perspective, the most significant practical impacts are:
- Scope certainty: the bonds are precisely identified, reducing ambiguity about whether a particular instrument is covered.
- Actor limitation: only J.P. Morgan Securities Ltd. (and related corporations) can rely on the exemption.
- Counterparty limitation: stabilising dealings must be with section 274 persons or sophisticated investors, requiring careful counterpart due diligence and documentation.
- Temporal limitation: stabilising action must occur within 30 days from the date of issue, requiring operational controls to track dealing dates.
In enforcement terms, if stabilising activity falls outside these conditions—wrong bond, wrong dealer, wrong counterparty category, or trading outside the 30-day window—then the exemption would not apply and sections 197 and 198 of the SFA could become relevant. Accordingly, legal teams should treat the Regulations as a checklist-driven compliance tool rather than a general permission to stabilise.
Related Legislation
- Securities and Futures Act (Cap. 289): including sections 197, 198, 274, 275(2), and the exemption-making power in section 337(1)
- Futures Act (as referenced in the provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Timeline (legislation timeline reference as provided 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. 22) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.