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 under section 337(1) of the Securities and Futures Act
- Commencement: 23 December 2004
- Status: Current version as at 27 March 2026 (per legislation record)
- Key provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory focus: Exemption from market conduct restrictions for “stabilising action” 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. 25) Regulations 2004 is a targeted regulatory instrument. In plain terms, it creates a limited exemption from certain market conduct rules in the Securities and Futures Act (the “SFA”) for stabilisation activities carried out in connection with a particular bond issue.
Stabilisation is a practice commonly used in capital markets where, after a bond is issued, an intermediary may take steps to support or maintain the market price of the bonds for a short period. The rationale is typically to reduce volatility and support orderly trading during the initial post-issuance period. However, stabilisation can also resemble conduct that market conduct rules are designed to prevent—such as manipulation or misleading price formation—so regulators often impose strict limits or require exemptions.
This set of Regulations is narrow in scope: it applies only to “stabilising action” taken in respect of a specific identified bond (the “Bonds”), within a defined time window, and only where the stabilising counterparties fall within specified categories (persons under section 274 of the SFA, or “sophisticated investors” under section 275(2) of the SFA). As a result, the Regulations do not create a general stabilisation regime; they provide a bespoke carve-out for a particular transaction.
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, commencement matters because the exemption is time-bound and must be assessed against the regulatory timeline for the relevant bond issue and stabilisation period.
Section 2 (Definitions) is central because it defines both the instrument being stabilised and the conduct that is being exempted.
First, “Bonds” are defined with precision. The Regulations specify 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. This level of specificity means the exemption cannot be extended to other bond series, other issuers, or different terms.
Second, “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. Two practical implications follow:
- The exemption is limited to stabilisation activity by Merrill Lynch International or its related corporations, not by any market participant.
- The conduct includes not only actual purchases but also offers or agreements to buy, which can be relevant for compliance controls around communications, conditional orders, and pre-trade arrangements.
Section 3 (Exemption) is the operative provision. It states 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, provided the stabilising action is taken with either:
- a person referred to in section 274 of the Act; or
- a sophisticated investor as defined in section 275(2) of the Act.
Although the extract does not reproduce sections 197 and 198, the structure indicates that those provisions impose market conduct restrictions that would otherwise apply to the relevant dealing activity. The Regulations therefore function as a carve-out from those restrictions for the specified stabilisation conduct.
The exemption is also conditional in three important ways:
- Time limit: stabilising action must occur within 30 days from the date of issue of the Bonds. This requires careful documentation of the issue date and monitoring of the stabilisation window.
- Counterparty category: stabilisation must be taken with counterparties falling within the SFA-defined categories (section 274 persons or sophisticated investors). This means that compliance teams must verify investor status and ensure that trades are executed only within the permitted counterparties.
- Instrument and actor specificity: the stabilisation must relate to the defined Bonds and be undertaken by Merrill Lynch International or related corporations (as per the definition of stabilising action).
In practice, these conditions mean that the exemption is not merely about having a “stabilisation” purpose. It is about meeting a regulatory checklist—the right bond, the right actor, the right time period, and the right counterparty category.
How Is This Legislation Structured?
The Regulations are structured in a straightforward, short form typical of transaction-specific exemptions:
- Part/Section 1: Citation and commencement (administrative commencement details).
- Section 2: Definitions, including the precise identification of the Bonds and the definition of stabilising action (who can do what, and where).
- Section 3: Exemption clause, specifying that sections 197 and 198 of the SFA do not apply to stabilising action in respect of the Bonds within 30 days from issue, subject to counterparty categories.
There are no additional schedules or complex procedural requirements in the extract provided. The Regulations rely on cross-references to the SFA for the substantive market conduct rules and for the investor/counterparty definitions.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA and refer to MAS and the SFA’s provisions, the practical “who” is determined by the definitions and the exemption conditions.
First, the exemption is relevant to Merrill Lynch International and its related corporations, because “stabilising action” is defined as actions taken by those entities. Second, the exemption is relevant to the counterparties with whom stabilising action is taken—specifically, persons referred to in section 274 of the SFA or sophisticated investors under section 275(2). Third, the exemption is limited to stabilising action relating to the specified convertible bond issue by International Bank of Taipei.
Accordingly, the Regulations do not create a general permission for any dealer to stabilise any bond. They operate as a narrow permission for a particular transaction and a particular stabilisation approach, within a short post-issuance window.
Why Is This Legislation Important?
This Regulations is important because it illustrates how Singapore’s market conduct framework balances two competing objectives: (1) allowing legitimate market practices that support orderly trading after issuance, and (2) preventing conduct that could undermine fair and transparent price formation.
From a practitioner’s perspective, the exemption is valuable because it reduces regulatory uncertainty for a specific bond transaction. Without the exemption, stabilisation-related dealing could potentially fall within the scope of prohibitions or restrictions in sections 197 and 198 of the SFA. By carving out stabilising action that meets defined conditions, the Regulations enable arrangers and dealers to carry out stabilisation while remaining within a clearly articulated regulatory boundary.
However, the same narrowness makes compliance critical. The exemption is conditional and time-limited. A legal team advising on such a transaction would typically need to confirm:
- the exact bond terms match the definition (issuer, maturity, instrument type, conversion features, and principal amount);
- the stabilising activity is undertaken by the defined entity (Merrill Lynch International or related corporations);
- the stabilisation occurs within 30 days from the bond issue date;
- the counterparties are limited to those permitted under the SFA cross-references (section 274 persons or sophisticated investors); and
- the stabilisation activities fall within the definition, including whether “offers” or “agreements to buy” are being used in ways that could be construed as stabilisation.
In short, the Regulations are a compliance roadmap for a specific stabilisation scenario. They are also a reminder that exemptions in market conduct law are rarely open-ended; they are usually transaction-specific and tightly bounded.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular, sections 197, 198, 274, 275(2), and the exemption-making power in section 337(1).
- Stabilising Act — referenced in the provided metadata (note: the extract provided does not set out its provisions).
- Futures Act — referenced in the provided metadata (note: the extract provided does not set out its provisions).
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.