Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 28) Regulations 2005
- Act Code: SFA2001-S796-2005
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Commencement: 12 December 2005
- Key Provisions: Section 1 (Citation and commencement); Section 2 (Definitions); Section 3 (Exemption)
- Regulatory Focus: Exemption from market conduct prohibitions for “stabilising action” in relation to specified convertible bonds
- Specified Bonds: “2008 Bonds” and “2010 Bonds” issued by Bharati Shipyard Limited
- Exemption Window: Within 30 days from the date of issue of the relevant bonds
- Most Relevant Market Conduct Sections Exempted: Sections 197 and 198 of the Securities and Futures Act
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 28) Regulations 2005 (“Stabilising Action Exemption Regulations”) is a targeted regulatory instrument. In plain language, it creates a limited exemption that allows certain market participants to take “stabilising action” in relation to two specific tranches of convertible bonds without breaching the Securities and Futures Act’s general market conduct rules.
Stabilising action is a practice commonly associated with securities offerings. During and shortly after an issuance, stabilisation measures may be used to reduce volatility and support orderly trading—typically by permitting a stabilising manager to buy (or offer to buy) securities under controlled conditions. However, stabilisation can also resemble prohibited conduct if it is not carefully ring-fenced. These Regulations therefore do not broadly legalise stabilisation; they carve out a narrow exemption for stabilising action in respect of the specified bonds, for a defined time period, and only when the stabilising counterparties fall within specified categories.
Practically, the Regulations reflect a balance: Singapore’s market conduct framework aims to protect investors and market integrity, but it also recognises that stabilisation may be commercially necessary and beneficial in certain issuance contexts. The exemption is therefore conditional and bond-specific, rather than a general permission for stabilisation in all bond offerings.
What Are the Key Provisions?
1. Citation and commencement (Section 1)
Section 1 provides the short title and states that the Regulations come into operation on 12 December 2005. For practitioners, this matters primarily for determining the legal basis for any stabilising conduct and for aligning the exemption with the relevant issuance timeline.
2. Definitions (Section 2)
Section 2 is critical because the exemption depends entirely on the defined scope of the bonds and the defined meaning of “stabilising action”. The Regulations define:
- “2008 Bonds”: 3-year convertible bonds due December 2008 issued by Bharati Shipyard Limited for a principal amount of up to US$20 million. These bonds are convertible into fully paid ordinary shares of Bharati Shipyard Limited with a par value of 10 Indian Rupees each.
- “2010 Bonds”: 5-year convertible bonds due December 2010 issued by Bharati Shipyard Limited for a principal amount of up to US$80 million, also convertible into ordinary shares with a par value of 10 Indian Rupees each.
- “securities”: has the same meaning as in section 239(1) of the Securities and Futures Act.
- “stabilising action”: an action taken in Singapore or elsewhere by Citigroup Global Markets Limited (or any of its related corporations) to buy, or to offer or agree to buy, either:
- the 2008 Bonds to stabilise or maintain their market price in Singapore or elsewhere; or
- the 2010 Bonds to stabilise or maintain their market price in Singapore or elsewhere.
Two practical implications follow from these definitions. First, the exemption is issuer- and instrument-specific—it is not a general stabilisation regime. Second, it is manager-specific: only stabilising action by Citigroup Global Markets Limited (or its related corporations) falls within the defined term. If stabilisation is carried out by another entity, the exemption may not apply unless another exemption exists.
3. The exemption from Sections 197 and 198 (Section 3)
Section 3 is the operative provision. It states that Sections 197 and 198 of the Securities and Futures Act shall not apply to stabilising action taken in respect of the specified bonds, subject to conditions.
(a) Exemption for the “2008 Bonds” (Section 3(1))
The exemption applies to stabilising action taken in respect of the 2008 Bonds within 30 days from the date of issue of the 2008 Bonds, with stabilising counterparties limited to any of the following:
- (a) an institutional investor
- (b) a “relevant person” as defined in section 275(2) of the Act
- (c) a person who acquires the 2008 Bonds as principal, provided that the consideration is not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether paid in cash or by exchange of securities or other assets.
(b) Exemption for the “2010 Bonds” (Section 3(2))
The structure is identical for the 2010 Bonds: the exemption applies to stabilising action taken in respect of the 2010 Bonds within 30 days from the date of issue, again only where the stabilising counterparties are:
- (a) an institutional investor
- (b) a “relevant person” under section 275(2) of the Act
- (c) a principal acquirer meeting the $200,000 minimum consideration per transaction threshold (or foreign currency equivalent), including consideration paid by exchange of securities or other assets.
Key practitioner takeaways from Section 3
The exemption is best understood as a three-part filter:
- Time filter: stabilising action must occur within 30 days from the bond issue date.
- Counterparty filter: stabilising purchases/offers must be directed to specified categories (institutional investors, relevant persons, or principal acquirers meeting the minimum consideration threshold).
- Conduct filter: the action must fall within the defined meaning of “stabilising action”, i.e., carried out by Citigroup Global Markets Limited (or its related corporations) to buy or offer to buy the specified bonds to stabilise or maintain market price.
Because the exemption is expressed as “Sections 197 and 198 … shall not apply”, it operates as a statutory carve-out. It does not necessarily remove other regulatory obligations (for example, disclosure, licensing, or other market conduct requirements that may exist outside Sections 197 and 198). Accordingly, counsel should treat the exemption as narrowly scoped and confirm compliance with any other applicable requirements.
How Is This Legislation Structured?
The Regulations are concise and consist of an enacting formula followed by three substantive provisions:
- Section 1 (Citation and commencement): establishes the short title and commencement date.
- Section 2 (Definitions): defines the two bond instruments, the meaning of “securities” by reference to the Act, and—most importantly—the defined term “stabilising action” tied to Citigroup Global Markets Limited and the purpose of stabilising or maintaining market price.
- Section 3 (Exemption): provides the operative exemption from Sections 197 and 198 of the Securities and Futures Act, with conditions on timing and eligible counterparty categories for stabilising action in respect of the 2008 and 2010 Bonds.
There are no additional parts or complex schedules in the extract provided; the Regulations are designed to function as a targeted exemption instrument rather than a comprehensive market conduct code.
Who Does This Legislation Apply To?
Although the Regulations are made under the Securities and Futures Act, their practical application is directed at parties involved in stabilising action for the specified bonds. The exemption is available only for stabilising action as defined in Section 2—meaning it is limited to actions taken by Citigroup Global Markets Limited (or its related corporations). Therefore, the primary regulated actor is the stabilising manager (and its related entities) conducting stabilisation activities.
However, the exemption also depends on who the stabilising action is taken against. Section 3 restricts the exemption to stabilising action undertaken with certain counterparty types: institutional investors, relevant persons, or principal acquirers meeting the $200,000 minimum consideration per transaction threshold. This means that even where the stabilising manager is eligible, the exemption may not apply if the stabilising purchases are made from (or offered to) counterparties outside those categories.
Why Is This Legislation Important?
This Regulations is important because it demonstrates how Singapore’s market conduct framework accommodates stabilisation while maintaining investor protection. Sections 197 and 198 of the Securities and Futures Act likely contain prohibitions or restrictions aimed at preventing manipulative or misleading market practices. Without an exemption, stabilising purchases could expose the stabilising manager and related parties to regulatory breach risk.
From a practitioner’s perspective, the value of this instrument lies in its precision. It does not attempt to regulate stabilisation generally; instead, it provides a bond-specific and manager-specific carve-out. That precision is crucial for compliance planning in capital markets transactions: counsel can map the transaction timeline (issue date and the 30-day window), identify the stabilising manager, and confirm that counterparties fall within the defined categories and meet the minimum consideration threshold where applicable.
In addition, the Regulations highlight the importance of transaction documentation and trade allocation. Because the exemption is conditional on the counterparty category and consideration level, firms should ensure that trade records, confirmations, and internal approvals can evidence that each stabilising transaction falls within the exemption’s parameters. Where consideration is paid by exchange of securities or other assets, the $200,000 threshold (or equivalent) becomes a valuation and documentation exercise that should be handled carefully.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly Sections 197, 198, 239(1), 275(2), and the regulation-making power in Section 337(1)
- Futures Act (as referenced in the provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Timeline (as referenced in the provided 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. 28) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.