Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) Regulations 2006
- Act Code: SFA2001-S14-2006
- Legislative Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Power Used: Section 337(1) of the Securities and Futures Act
- Commencement: 6 January 2006
- Enacting Date: 4 January 2006
- Regulation Number: S 14 of 2006 (SL 14/2006)
- Status: Current version as at 27 March 2026
- Key Provisions: Regulation 1 (Citation and commencement), Regulation 2 (Definitions), Regulation 3 (Exemption)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) Regulations 2006 (“Stabilising Action Exemption Regulations”) create a targeted exemption from certain market conduct rules in the Securities and Futures Act (the “SFA”) for stabilising activity relating to a specific bond issue.
In plain language, the Regulations recognise that, during the early period after a bond is issued, market participants may undertake “stabilising action” to help maintain an orderly market price. Such activity can involve buying (or offering to buy) the bonds so that trading does not become unduly volatile immediately after issuance.
However, market conduct provisions in the SFA are designed to prevent manipulation and improper practices. This subsidiary legislation therefore carves out a narrow exception: stabilising action is permitted—without triggering the relevant SFA provisions—if it meets defined conditions (including who the counterparty is, the timing, and a minimum consideration threshold for certain purchasers).
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Bonds) Regulations 2006” and came into operation on 6 January 2006. This matters for practitioners assessing whether stabilising conduct falls within the regulatory framework at the relevant time.
2. Definitions (Regulation 2)
The Regulations define three core terms that determine their scope:
- “Bonds”: The exemption is not general. It applies to a very specific instrument—the 5-year zero coupon convertible bonds due January 2011 issued by Lupin Limited, for a principal amount of up to US$100 million. These bonds are convertible into new ordinary shares of Lupin Limited with a par value of 10 Indian Rupees each.
- “securities”: This takes its meaning from section 239(1) of the SFA, ensuring consistency with the SFA’s broader definitional framework.
- “stabilising action”: This is defined as an action taken in Singapore or elsewhere by Merrill Lynch International (or any related corporation) to buy, or 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.
For legal analysis, the definition is crucial because it limits who may conduct stabilising action (Merrill Lynch International and related corporations) and what the action must be for (stabilising or maintaining market price). It also clarifies that the conduct can occur outside Singapore, but the exemption is still relevant because the market price being stabilised may be in Singapore or elsewhere.
3. The exemption from SFA sections 197 and 198 (Regulation 3)
The heart of the Regulations is Regulation 3. It provides 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, provided the stabilising action is taken with one of the following categories of counterparties:
- (a) an institutional investor
- (b) a relevant person as defined in section 275(2) of the SFA
- (c) a person who acquires the Bonds as principal, but only if 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
Timing limitation: The exemption is limited to stabilising action taken within 30 days from the date of issue. Practitioners should therefore identify the “date of issue” of the Bonds and ensure that any stabilising purchases, offers, or agreements to buy fall within that window.
Counterparty limitation: The exemption is not available for stabilising action involving all counterparties. It is restricted to institutional investors, “relevant persons” (as defined in the SFA), or principal acquirers meeting the minimum consideration threshold.
Minimum consideration threshold (Regulation 3(c)): Where the counterparty is a person acquiring as principal, the transaction must involve consideration of at least $200,000 (or equivalent). This threshold applies per transaction and covers both cash and non-cash consideration (including exchange of securities or other assets). This is a practical compliance point: documentation should evidence the consideration amount and the nature of payment/exchange.
Regulatory effect: By stating that sections 197 and 198 “shall not apply” to qualifying stabilising action, the Regulations effectively remove the risk that the stabilising conduct would be treated as a breach of those specific market conduct provisions. However, the exemption is tightly drawn; it does not necessarily immunise conduct from other legal requirements (for example, other SFA provisions, prospectus-related obligations, or general prohibitions that may not be covered by the exemption).
How Is This Legislation Structured?
The Regulations are short and structured into three main provisions:
- Regulation 1 sets out the citation and commencement.
- Regulation 2 provides definitions that determine the scope of “Bonds” and “stabilising action”, and cross-references the SFA definition of “securities”.
- Regulation 3 contains the substantive exemption, specifying which SFA sections are disapplied, the time window (30 days from issue), and the permitted categories of counterparties including the $200,000 consideration threshold for principal acquirers.
Who Does This Legislation Apply To?
Although the Regulations are framed as an exemption from SFA provisions, their practical application is directed at parties involved in stabilising activity in relation to the defined Bonds. The definition of “stabilising action” restricts the conduct to actions taken by Merrill Lynch International or its related corporations. Accordingly, the exemption is most relevant to those entities and their stabilisation programmes.
In addition, the exemption’s availability depends on the counterparty to the stabilising transactions. The Regulations therefore also matter to counterparties—such as institutional investors, relevant persons (per section 275(2) of the SFA), and principal acquirers—because the exemption only applies if the stabilising action is taken with counterparties falling within those categories and, for principal acquirers, if the minimum consideration threshold is met.
Why Is This Legislation Important?
This subsidiary legislation is important because it balances two competing regulatory objectives: (1) preventing market manipulation and improper market conduct, and (2) allowing legitimate market stabilisation practices that can support price discovery and orderly trading immediately after issuance.
For practitioners, the Regulations provide a clear compliance pathway. If stabilising action is undertaken within the specified 30-day post-issue period, by the defined stabilising entity (Merrill Lynch International and related corporations), and with qualifying counterparties, then sections 197 and 198 of the SFA are disapplied. This reduces legal uncertainty and helps market participants structure stabilisation activities in a way that aligns with Singapore’s market conduct framework.
At the same time, the Regulations’ narrow drafting means that they should not be treated as a blanket authorisation for all stabilisation. The exemption is bond-specific (Lupin Limited’s 5-year zero coupon convertible bonds due January 2011), time-limited, and counterparty-limited. In practice, counsel should ensure that transaction records, trade confirmations, and internal compliance controls can demonstrate: (i) the Bonds involved match the defined instrument; (ii) the stabilising trades occurred within the 30-day window; and (iii) the counterparty category and (where applicable) the $200,000 minimum consideration per transaction are satisfied.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197, 198, 239(1), 275(2), and the regulation-making power in 337(1).
- Stabilising Act (as referenced in the legislation metadata)
- Futures Act (as referenced in the legislation 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) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.