Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 25) Regulations 2004
- Act Code: SFA2001-S764-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting authority: Monetary Authority of Singapore (MAS)
- Legal basis: Powers conferred by section 337(1) of the Securities and Futures Act
- Citation: SL 764/2004
- Commencement: 23 December 2004
- Status: Current version as at 27 March 2026 (per the legislation record)
- Key provisions: Section 1 (citation and commencement), 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. 25) Regulations 2004 is a targeted regulatory instrument. In essence, it creates a narrow exemption from certain market conduct rules in the Securities and Futures Act (the “Act”) for a specific type of trading activity—“stabilising action”—carried out in relation to a particular bond issue.
Market conduct provisions in the Act are designed to promote fair dealing, prevent market manipulation, and ensure that trading and distribution activities do not mislead investors or distort prices. However, in some capital markets transactions, stabilisation is a recognised practice: under controlled conditions, an arranger or dealer may buy (or offer to buy) securities shortly after issuance to help maintain orderly trading and reduce volatility.
This set of Regulations permits stabilising action in respect of a defined bond issue, but only within a strict time window and only for specified categories of counterparties. The Regulations therefore balance two competing policy goals: (1) protecting the market from manipulative conduct, and (2) allowing legitimate stabilisation practices that support the functioning of primary and secondary markets.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states that they come into operation on 23 December 2004. For practitioners, this is important because the exemption’s availability depends on the timing of stabilising action relative to the bond’s issuance date and the Regulations’ commencement.
Section 2 (Definitions) is central because the exemption is only as broad as the defined terms. Two definitions matter:
- “Bonds” are precisely identified. They are the 5-year zero coupon convertible bonds due December 2009 issued by International Bank of Taipei for a principal amount of up to US$180 million. The bonds are convertible into common shares of International Bank of Taipei with a par value of NT$10 each.
- “stabilising action” is defined as an action taken in Singapore or elsewhere by Merrill Lynch International (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.
These definitions make the instrument transaction-specific. If the security is not the defined bond issue, or if the stabilising activity is not carried out by Merrill Lynch International (or its related corporations), the exemption will not apply. Similarly, if the activity is not aimed at stabilising or maintaining market price, it may fall outside the definition.
Section 3 (Exemption) 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 of the Bonds, with respect to stabilising action taken with:
- (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, Section 3 does two things. First, it creates a time-limited exemption: stabilising action must occur within 30 days from the bond issue date. Second, it creates a counterparty-limited exemption: the stabilising action must be taken with persons falling within the Act’s specified categories (section 274 persons) or with sophisticated investors.
While the extract does not reproduce Sections 197 and 198 themselves, the structure indicates that those sections impose market conduct restrictions that would otherwise apply to the relevant trading conduct. The Regulations carve out stabilising action from those restrictions, but only under the defined conditions. For counsel, the key compliance task is to ensure that the stabilisation programme is documented and executed so that it fits squarely within the exemption’s boundaries—security, actor, purpose, timing, and counterparty.
How Is This Legislation Structured?
The Regulations are short and consist of an enacting formula followed by three substantive provisions:
- Section 1: Citation and commencement.
- Section 2: Definitions of “Bonds” and “stabilising action”.
- Section 3: The exemption from Sections 197 and 198 of the Act, including the 30-day limit and the permitted counterparty categories.
Because the instrument is so concise, practitioners should treat it as a precision compliance document. There are no general interpretive provisions beyond the definitions, and no additional procedural requirements are visible in the extract. The legal effect therefore turns heavily on the exact wording of the definitions and the conditions in Section 3.
Who Does This Legislation Apply To?
This Regulations applies to stabilising action in relation to the defined International Bank of Taipei convertible bond issue. The exemption is specifically tied to actions taken by Merrill Lynch International or its related corporations. Accordingly, the primary regulated parties are the entities conducting the stabilisation activity under the programme.
It also applies in relation to the counterparties with whom stabilising action is taken. The exemption is limited to stabilising action taken within 30 days of issuance with persons referred to in section 274 of the Act or with sophisticated investors under section 275(2). This means that even if the stabilisation is otherwise properly structured, it may not be covered if the counterparty falls outside those categories.
Why Is This Legislation Important?
For market participants, this Regulations provides legal certainty for a common transaction practice: stabilisation of newly issued securities. Without an exemption, stabilising trades could be argued to fall within statutory market conduct prohibitions or restrictions, creating legal risk for arrangers, dealers, and their affiliates. By carving out stabilising action from Sections 197 and 198, MAS enables legitimate stabilisation activities to proceed within defined guardrails.
From a compliance perspective, the Regulations’ importance lies in its narrow tailoring. The exemption is not a general stabilisation licence for all bonds or all dealers. It is limited to a specific bond issue, a specific dealer group (Merrill Lynch International and related corporations), and a specific timeframe (30 days from issue). It is also limited by counterparty type (section 274 persons and sophisticated investors). This means that practitioners must implement controls to ensure that every stabilising trade is traceable to the exemption’s conditions.
In enforcement terms, the Regulations also signal MAS’s policy approach: stabilisation may be permitted, but only where the activity is structured to reduce the risk of misleading the market. Counsel advising on stabilisation programmes should therefore treat the Regulations as part of a broader compliance framework under the Act, including monitoring, record-keeping, and ensuring that stabilising activity is not used as a vehicle for improper price support or distribution practices.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly Sections 197, 198, 274, 275(2), and the regulation-making power in section 337(1).
- Futures Act — referenced in the metadata context (relevant where cross-regulatory concepts arise, though this specific instrument is made under the Securities and Futures Act).
- Stabilising Act — referenced in the metadata context (likely part of the broader stabilisation framework in Singapore’s market conduct regime).
- Timeline / Legislation timeline — for confirming the correct version and commencement date.
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. 25) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.