Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 23) Regulations 2004
- Act Code: SFA2001-S743-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Made under section 337(1) of the Securities and Futures Act
- Commencement: 14 December 2004
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
- Status: Current version as at 27 March 2026 (with amendments reflected in the extract)
- Amendments (as shown in extract): Amended by S 22/2005 (w.e.f. 11/01/2005) and S 62/2005 (w.e.f. 01/02/2005)
- Regulatory Focus: Exemption from market conduct restrictions for stabilising actions in relation to specified convertible bonds
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 23) Regulations 2004 (“Stabilising Action Exemption Regulations”) creates a targeted regulatory carve-out within Singapore’s market conduct framework. In essence, it allows certain market participants to take “stabilising action” in relation to a specific bond issue without being caught by particular prohibitions in the Securities and Futures Act (“SFA”).
Stabilisation is a familiar concept in securities markets. During or shortly after the launch of a new issue, stabilising purchases (or offers to buy) may be undertaken to support liquidity and reduce excessive volatility. However, market conduct rules are designed to prevent manipulation and misleading trading practices. This legislation balances those competing objectives by permitting stabilisation only for a defined set of bonds, within a defined time window, and for defined categories of persons.
Although the Regulations are short, they are legally significant because they operate as an exemption from sections 197 and 198 of the SFA. Those provisions typically regulate conduct that could otherwise be characterised as market manipulation or improper dealing. The Regulations therefore matter most to issuers, underwriters, and trading desks involved in bond offerings, particularly where stabilisation may be necessary or commercially expected.
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
Regulation 1 provides the short title and states that the Regulations came into operation on 14 December 2004. For practitioners, this is relevant when assessing whether stabilising conduct occurred within the legal regime applicable at the time of dealing.
2. Definitions (Regulation 2)
The Regulations contain two crucial definitions that effectively “lock” the exemption to a particular transaction and a particular type of conduct.
“Bonds” are defined very specifically as the 5-year zero coupon convertible bonds due February 2010 issued by Powerchip Semiconductor Corporation, for a principal amount of up to US$200 million. The bonds are convertible into ordinary shares of Powerchip Semiconductor Corporation with a par value of NT$10 each. The definition is not generic; it is transaction-specific. This means that stabilising action in respect of other bonds—even if issued by the same issuer—would not automatically qualify for the exemption.
“stabilising action” is defined as an action taken in Singapore or elsewhere by Deutsche Bank AG, Hong Kong Branch (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 operationally important: it covers not only actual purchases but also offers or agreements to buy, and it extends extraterritorially (conduct outside Singapore can still be relevant if it is part of stabilisation for the bonds’ market price).
3. The exemption from sections 197 and 198 of the SFA (Regulation 3)
Regulation 3 is the core 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, provided the stabilising action is taken with one of two categories of 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.
This structure is typical of exemptions: it narrows the exemption by (i) time, (ii) the specific bonds, and (iii) the permitted dealing counterparties. The exemption is therefore not a blanket permission for any stabilising trading; it is a conditional permission.
Practical implications of the 30-day window
The stabilising action must be taken within 30 days from the date of issue. For legal and compliance teams, the “date of issue” becomes a factual and documentary question. Practitioners should ensure that dealing records, trade confirmations, and internal approvals can demonstrate that stabilising trades occurred within the permitted period.
Counterparty limitation: section 274 persons and sophisticated investors
The exemption is limited to stabilising action taken with persons falling within section 274 of the SFA, or with sophisticated investors. While the extract does not reproduce those definitions, the legal effect is clear: stabilisation cannot be conducted indiscriminately with retail investors or other categories not captured by those provisions. This limitation is central to the policy rationale—stabilisation is permitted in a controlled context where counterparties are sufficiently informed or where the relevant persons are within the statutory framework.
How Is This Legislation Structured?
The Regulations are extremely concise and consist of three substantive provisions:
- Regulation 1 (Citation and commencement): identifies the instrument and its commencement date.
- Regulation 2 (Definitions): defines “Bonds” and “stabilising action”, which together determine the scope of the exemption.
- Regulation 3 (Exemption): provides the exemption from sections 197 and 198 of the SFA, subject to the 30-day time limit and the permitted categories of persons.
From a practitioner’s perspective, the Regulations operate as a targeted “switch” that turns off the application of specified SFA prohibitions for a narrow set of circumstances. There are no additional procedural requirements in the extract (such as reporting, approvals, or conditions). However, this does not necessarily mean there are no compliance expectations under the SFA generally; rather, the Regulations specifically carve out the application of sections 197 and 198 for qualifying stabilising action.
Who Does This Legislation Apply To?
The exemption is directed at stabilising action taken by Deutsche Bank AG, Hong Kong Branch or its related corporations. That means the primary regulated actor is the stabilising party. The definition of stabilising action is therefore not merely descriptive; it identifies who can benefit from the exemption.
In addition, Regulation 3 limits the exemption based on the counterparty or dealing context. Stabilising action must be taken within 30 days from the date of issue and with either (i) a person referred to in section 274 of the SFA or (ii) a sophisticated investor under section 275(2). Accordingly, even if the stabilising party is within the defined group, the exemption will not apply if the stabilising trades are conducted outside the permitted counterparty categories.
Why Is This Legislation Important?
This Regulations matters because it provides legal certainty for stabilisation activities in a specific bond issue. Without an exemption, stabilising purchases or offers to buy could be argued to fall within the prohibitions in sections 197 and 198 of the SFA. By carving out those sections for qualifying stabilising action, the Regulations reduce the risk that legitimate market-making or stabilisation conduct is treated as unlawful market manipulation.
For practitioners advising underwriters, trading participants, or issuers, the key value lies in the precision of the exemption. The Regulations do not authorise stabilisation broadly; they authorise stabilisation for:
- a specific bond instrument (Powerchip’s 5-year zero coupon convertible bonds due February 2010, up to US$200 million);
- conduct by Deutsche Bank AG, Hong Kong Branch (or related corporations);
- within a 30-day post-issue window; and
- with section 274 persons or sophisticated investors.
This precision is crucial for compliance design. It supports a “gating” approach: compliance teams can implement controls to ensure that only eligible instruments are stabilised, only eligible entities execute the stabilising trades, trades occur within the permitted time window, and counterparties meet the statutory categories.
Finally, the Regulations illustrate how Singapore’s market conduct regime accommodates market practices while maintaining investor protection. Stabilisation can be beneficial for price discovery and liquidity, but it must be constrained to avoid undermining market integrity. The exemption is a mechanism to permit stabilisation while still leaving other market conduct rules and general regulatory expectations in place.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular sections 197, 198, 274, and 275(2)
- Futures Act (as referenced in the provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Timeline (legislation 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. 23) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.