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
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Citation: S 94/2005 (SL 94/2005)
- Commencement: 23 February 2005
- Status: Current version as at 27 March 2026
- 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”) creates a targeted exemption from certain market conduct rules under the Securities and Futures Act (the “SFA”) for stabilising activities relating to a specific bond issue. In plain terms, it allows certain market participants to take limited steps to support the trading price of newly issued bonds without breaching the general prohibitions that would otherwise apply.
Stabilisation is a common feature of securities issuance. When bonds begin trading, their prices can be volatile. Under a stabilisation framework, an arranger or dealer may buy (or offer to buy) the relevant bonds for a limited period to help maintain orderly trading and reduce extreme price swings. However, stabilisation can also raise regulatory concerns because it may affect market integrity. Accordingly, the SFA contains provisions that restrict or regulate conduct that could distort prices.
This subsidiary legislation narrows the regulatory impact by carving out an exemption for stabilising actions taken in relation to a defined set of bonds—specifically, 5-year convertible bonds issued by Monnet Ispat Limited—provided the stabilising activity occurs within a strict time window and is undertaken by specified categories of persons (or persons meeting a defined investor sophistication threshold). The result is a controlled permission: stabilisation is allowed, but only under conditions that reduce the risk of improper market manipulation.
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 23 February 2005. For practitioners, this matters for determining whether stabilising conduct falls within the regulatory regime and for assessing compliance timelines.
2. Definitions (Section 2)
Section 2 defines two critical terms that control the scope of the exemption:
- “Bonds” are defined very specifically as the 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 global depositary shares have been issued at the time of conversion.
- “stabilising action” means 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 are important because they make the exemption issue-specific and participant-specific. A lawyer advising on stabilisation must confirm that the relevant instrument matches the defined “Bonds” and that the stabilising conduct is carried out by Merrill Lynch International or its related corporations, not by unrelated dealers.
3. The exemption from Sections 197 and 198 of the SFA (Section 3)
The operative provision is Section 3. It states that Sections 197 and 198 of the Act shall not apply to any 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 one of the following persons:
- (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.
Although the extract does not reproduce Sections 197, 198, 274, and 275, the structure indicates that the SFA imposes restrictions on certain market conduct and that the exemption is conditional on the counterparty or the relevant dealing relationship. In practice, this means stabilising trades must be conducted in a manner that involves either:
- counterparties falling within the statutory category in s 274, or
- counterparties that qualify as sophisticated investors under s 275(2).
Time limitation is central. The exemption applies only to stabilising action taken within 30 days from the date of issue. This is a hard boundary. A lawyer should therefore ensure that any stabilisation programme, dealing records, and trade dates are capable of demonstrating compliance with the 30-day window.
Participant limitation is also central. Because “stabilising action” is defined as actions by Merrill Lynch International (or its related corporations), the exemption is not a general stabilisation licence for any dealer. If stabilisation is performed by a different entity, the exemption may not apply, even if the conduct is otherwise similar.
Practical compliance point: The exemption is framed as “Sections 197 and 198 … shall not apply” to stabilising action meeting the conditions. This suggests that outside those conditions, the general prohibitions or restrictions in the SFA remain fully applicable. Therefore, counsel should treat the exemption as a narrow safe harbour rather than a broad permission.
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): identifies the Regulations and their commencement date.
- Section 2 (Definitions): defines “Bonds” and “stabilising action,” which are the two key terms that determine the scope of the exemption.
- Section 3 (Exemption): provides the exemption from specified SFA provisions (Sections 197 and 198) for stabilising action in respect of the defined bonds, subject to the 30-day limit and the counterparty categories in Sections 274 and 275(2).
From a practitioner’s perspective, the structure reflects a typical Singapore approach for targeted exemptions: define the instrument and the conduct, then specify the precise legal consequences and conditions.
Who Does This Legislation Apply To?
The Regulations apply to stabilising actions taken in respect of the defined Monnet Ispat Limited convertible bonds, but only where the stabilising action is carried out by Merrill Lynch International or its related corporations. This means the exemption is directed primarily at the stabilising dealer/arranger and its corporate group.
In addition, the exemption is conditional on the stabilising action being taken “with” a person falling within section 274 of the SFA or a sophisticated investor under section 275(2). Accordingly, the Regulations also indirectly affect the relevant counterparties and the dealing arrangements used during the stabilisation period. A lawyer should therefore assess not only who is trading, but also the legal status and eligibility of the counterparties involved in those trades.
Why Is This Legislation Important?
This legislation is important because it demonstrates how Singapore balances market integrity with practical realities of securities issuance. Stabilisation can support orderly markets during the initial trading period of a bond issue. At the same time, stabilisation can be misused to create artificial price movements. By exempting stabilising action only within a defined period, for a defined bond issue, and involving defined counterparty categories, the Regulations aim to reduce the risk of improper market conduct.
For practitioners, the key legal significance lies in the conditional safe harbour structure. The Regulations do not repeal or broadly relax the SFA’s market conduct rules. Instead, they provide a limited exemption from Sections 197 and 198 for stabilising actions that meet the precise statutory conditions. This is crucial for advising on:
- the design and documentation of stabilisation programmes;
- trade execution and recordkeeping to evidence the 30-day window;
- counterparty eligibility checks (section 274 persons and sophisticated investors under section 275(2)); and
- corporate authority and compliance controls ensuring the stabilising entity is Merrill Lynch International or a related corporation.
Finally, because the bonds are defined with specificity (including conversion mechanics and the maximum principal amount), the Regulations also serve as a reminder that exemptions in Singapore can be instrument-specific. Counsel should avoid assuming that an exemption granted for one bond issue automatically extends to other issues, even within the same issuer or similar terms.
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).
- Futures Act (as referenced in the statute metadata context).
- Stabilising Act (as referenced in the statute metadata context).
- Legislation timeline / amendments records (for confirming the correct version as at 27 March 2026).
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.