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
- Commencement: 23 February 2005
- Legislative Instrument Number: SL 94/2005
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (including “Bonds” and “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the Securities and Futures Act for specified stabilising action
- Status: Current version as at 27 March 2026
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 (Bonds) Regulations”) is a targeted regulatory instrument that creates a limited exemption from certain market conduct rules in the Securities and Futures Act (the “SFA”). In plain terms, it allows specified persons to take “stabilising action” in relation to a particular bond issue without breaching the SFA provisions that would otherwise restrict or prohibit such conduct.
Market conduct rules are designed to protect investors and maintain fair, orderly markets. Stabilisation activity—such as buying bonds (or agreeing to buy) shortly after issuance to support or maintain the market price—can, depending on the legal framework, be treated as potentially manipulative. These Regulations address that tension by carving out a narrow exemption where stabilisation is carried out for defined purposes, within a defined time window, and in relation to defined instruments.
Crucially, this is not a general stabilisation regime for all bonds. It is an instrument tied to a specific bond issue: the 5-year convertible bonds due February 2010 issued by Monnet Ispat Limited, with conversion into ordinary shares (or global depositary shares, if issued). The exemption is also tied to stabilisation actions taken by a specific market participant group—Merrill Lynch International and its related corporations—and it applies only for a limited period after issuance.
What Are the Key Provisions?
Section 1 (Citation and commencement) is straightforward. It provides the short title and states that the Regulations come into operation on 23 February 2005. For practitioners, this matters because the exemption is time-sensitive and must be assessed against the commencement date and the relevant “within 30 days from the date of issue” requirement in Section 3.
Section 2 (Definitions) is the heart of the Regulations because it defines the scope of both the instrument and the conduct. Two definitions are particularly important:
- “Bonds” are defined narrowly 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.
From a compliance perspective, these definitions mean that the exemption is not available to every dealer or issuer. It is limited to stabilisation activity by Merrill Lynch International and its related corporations, and it is limited to the specified Monnet Ispat convertible bond issue. Any stabilisation outside these parameters would not fall within the exemption and could expose the relevant parties to breaches of the SFA market conduct provisions.
Section 3 (Exemption) provides the operative legal effect. It states that Sections 197 and 198 of the SFA shall not apply to any stabilising action taken in respect of any of the Bonds within 30 days from the date of issue, provided the stabilising action is taken with a person falling into one of two categories:
- (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.
Practically, Section 3 does two things at once. First, it creates a time-limited exemption (30 days from the date of issue). Second, it creates a counterparty-limited exemption (transactions must be with persons in the specified SFA-defined categories). This is a common legislative technique: it reduces the risk that stabilisation could be used to influence retail investors or to create misleading market signals.
For a lawyer advising a financial institution, the key compliance tasks flowing from Section 3 include: (i) confirming the transaction is in the defined “Bonds”; (ii) confirming the stabilising activity is undertaken by Merrill Lynch International or its related corporations; (iii) confirming the stabilising activity occurs within the 30-day window; and (iv) confirming the counterparties fall within section 274 persons or are sophisticated investors under section 275(2). If any element fails, the exemption may not apply.
How Is This Legislation Structured?
The Regulations are structured in a compact format with three substantive provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that determine the scope of the exemption—particularly the definitions of “Bonds” and “stabilising action”.
- Section 3 contains the exemption from specified SFA provisions (sections 197 and 198) and sets out the time limit and permitted counterparty categories.
There are no additional parts or complex schedules in the extract provided. The legal effect is therefore concentrated: practitioners should focus on the definitions and the conditions in Section 3.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA, their practical application is directed at participants who might otherwise be caught by the SFA’s market conduct restrictions. The exemption is specifically available for stabilising action taken by Merrill Lynch International or its related corporations. Accordingly, the primary regulated parties are those entities that may conduct stabilisation in connection with the defined Monnet Ispat bond issue.
In addition, Section 3 imposes a counterparty limitation. The stabilising action must be taken with a person referred to in section 274 of the SFA or with a sophisticated investor under section 275(2). This means that even where the stabilising dealer is within the defined group, the exemption may fail if the stabilisation is executed with counterparties outside those categories.
Why Is This Legislation Important?
This Regulations is important because it provides a legally sanctioned pathway for stabilisation of a specific bond issue—activity that is often commercially desirable in the immediate post-issuance period. In convertible bond offerings, market liquidity and price discovery can be volatile. Stabilisation can help reduce abrupt price swings and support orderly trading, which may be beneficial to the issuer, underwriters, and investors.
At the same time, the Regulations reflect the regulatory concern that stabilisation can be misused or misunderstood as market manipulation. By limiting the exemption to (i) a specific bond issue, (ii) a specific stabilising dealer group, (iii) a strict 30-day post-issuance period, and (iv) transactions with section 274 persons or sophisticated investors, the law attempts to balance market functioning with investor protection.
From an enforcement and risk perspective, the exemption is not automatic. If a firm undertakes stabilising action outside the defined parameters, the exemption will not apply and the firm may be exposed to liability under the SFA provisions that are otherwise excluded. Therefore, legal review should focus on documentation and process: trade confirmations, counterparty classification, timing controls, and internal approvals should be aligned with the statutory conditions.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular:
- Sections 197 and 198 (the provisions from which exemption is granted)
- Section 274 (persons referenced for the counterparty condition)
- Section 275(2) (definition of “sophisticated investor”)
- Section 337(1) (authorising power for making the Regulations)
- Futures Act (listed in the metadata as related legislation)
- Stabilising Act (listed in the metadata as related legislation)
- Timeline / Legislation timeline (for version control and amendments tracking)
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.