Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) (No. 4) Regulations 2005
- Act Code: SFA2001-S94-2005
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting power: Section 337(1) of the Securities and Futures Act
- Commencement: 23 February 2005
- Legislation status: Current version as at 27 March 2026 (per provided extract)
- Legislative instrument number: SL 94/2005
- 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. 4) Regulations 2005 (“Stabilising Action Exemption Regulations”) is a targeted exemption instrument made under the Securities and Futures Act (SFA). In plain language, it allows certain market participants to take “stabilising action” in relation to a specific bond issue without being caught by the general market conduct prohibitions that would otherwise apply.
Stabilising action is a common feature of securities issuance. During the initial trading period after a bond is issued, an issuer, underwriter, or their affiliates may intervene to support liquidity and reduce excessive price volatility. However, market conduct rules are designed to prevent manipulation and unfair trading practices. This legislation reconciles those objectives by carving out a narrow exemption for stabilising activity, but only for a defined bond and only within a defined time window.
Importantly, the exemption is not open-ended. It is limited to stabilising action taken in respect of “Bonds” as defined in the Regulations, and only within 30 days from the date of issue. It also restricts the eligible counterparties to persons identified in the SFA and to a particular category of investors described as “sophisticated investors” under the SFA.
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 February 2005. For practitioners, this matters because exemptions and compliance obligations turn on effective dates—particularly where conduct occurs around the issuance and early trading period.
Section 2 (Definitions) is the heart of the instrument’s precision. It defines two critical terms: “Bonds” and “stabilising action”. The definition of “Bonds” is highly specific: it refers to 5-year convertible bonds due February 2010 issued by Monnet Ispat Limited for a principal amount of up to US$60 million. The bonds are convertible into fully paid ordinary shares of Monnet Ispat Limited with a par value of 10 Indian Rupees each, or into global depositary shares if such depositary shares have been issued at the time of conversion.
This specificity is legally significant. It means the exemption cannot be relied upon for other bond issues, even if they are similar in structure (e.g., other convertible bonds, different maturities, different issuers, or different principal amounts). For compliance teams, the definition functions as a gatekeeping mechanism: the exemption is available only for the particular instrument described.
The definition of “stabilising action” is equally constrained. It refers to 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. This definition indicates two practical points: (1) the stabilising activity is limited to a particular stabiliser (Merrill Lynch International and its related corporations), and (2) the purpose must be stabilisation/price maintenance, not general trading or investment.
Section 3 (Exemption) provides the operative relief. It states that Sections 197 and 198 of the SFA shall not apply to any stabilising action taken in respect of the Bonds within 30 days from the date of issue, provided the stabilising action is taken with either: (a) a person referred to in section 274 of the SFA; or (b) a sophisticated investor as defined in section 275(2) of the SFA.
Although the extract does not reproduce Sections 197 and 198, the structure of the exemption indicates that those sections contain general prohibitions or restrictions on certain market conduct practices (likely including conduct that could be characterised as manipulative or otherwise improper). The Regulations therefore operate as a statutory “safe harbour” for stabilising conduct that would otherwise breach those prohibitions.
For practitioners, the key compliance questions arising from Section 3 are:
- Timing: Is the stabilising action taken within 30 days from the date of issue? If stabilising activity continues beyond that period, the exemption would no longer apply.
- Instrument scope: Is the activity in respect of the exact “Bonds” as defined (Monnet Ispat Limited, 5-year convertible bonds due February 2010, up to US$60 million, with the specified conversion mechanics)?
- Counterparty eligibility: Is the stabilising action taken with a person falling within section 274 or with a sophisticated investor under section 275(2)? This is a crucial limitation. Even if the stabiliser and timing are correct, the exemption may fail if the trades are not conducted with eligible counterparties.
In effect, Section 3 creates a narrow exemption that is both subject-matter specific (the Bonds) and process specific (who can be dealt with, and when). This is typical of Singapore market conduct exemptions: they aim to permit stabilisation while preserving investor protection and market integrity.
How Is This Legislation Structured?
The Regulations are structured as a short instrument with three substantive provisions:
- Section 1 sets out the citation and commencement date.
- Section 2 provides definitions that precisely identify the relevant bond issue and the stabilising activity.
- Section 3 contains the exemption, specifying which SFA provisions are disapplied, the time limit, and the eligible categories of counterparties.
Because the Regulations are brief, practitioners should read them together with the referenced provisions of the SFA—particularly Sections 197 and 198 (the rules being exempted from), and Sections 274 and 275(2) (the counterparty categories that qualify for the exemption).
Who Does This Legislation Apply To?
The exemption is directed at stabilising action in relation to the defined Monnet Ispat convertible bonds. In practical terms, it applies to the stabiliser(s) described in the definition of “stabilising action”—namely Merrill Lynch International and its related corporations—when they take specified actions (buying or agreeing to buy) to stabilise or maintain market price.
However, the exemption’s availability also depends on the counterparty and the timing of the trades. Section 3 restricts the exemption to stabilising action taken within 30 days from the date of issue and with either persons referred to in section 274 of the SFA or with a sophisticated investor under section 275(2). Accordingly, the Regulations are not merely about who performs the stabilisation; they also regulate with whom the stabiliser may conduct the relevant dealings to remain within the exemption.
Why Is This Legislation Important?
This Regulations is important because it demonstrates how Singapore’s market conduct framework balances two competing policy goals: (1) allowing legitimate stabilisation practices in connection with securities offerings, and (2) preventing conduct that could be characterised as market manipulation or improper price support.
For issuers, underwriters, and trading desks, the exemption provides operational clarity during the sensitive post-issuance period. Without such an exemption, stabilising purchases or offers to buy could trigger prohibitions under the SFA. By disapplying Sections 197 and 198 for qualifying stabilising action, the Regulations reduce legal uncertainty and enable structured stabilisation strategies—provided strict conditions are met.
From an enforcement and risk perspective, the narrowness of the exemption is equally significant. The defined bond issue, the specified stabiliser, the 30-day limit, and the counterparty restrictions collectively mean that compliance failures can quickly remove the safe harbour. Practitioners should therefore ensure that documentation, trade reporting, and internal controls can evidence: (a) the date of issue and the 30-day window; (b) that the trades relate to the defined Bonds; (c) that the stabiliser is within the defined corporate group; and (d) that counterparties fall within the SFA categories referenced in Section 3.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular:
- Sections 197 and 198 (market conduct provisions disapplied by Section 3 of these Regulations)
- Section 274 (persons eligible for the exemption under Section 3(a))
- Section 275(2) (definition of “sophisticated investor” relevant to Section 3(b))
- Section 337(1) (authorising provision for making these Regulations)
- Stabilising Act (as referenced in the provided metadata)
- Futures Act (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. 4) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.