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
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289), section 337(1)
- Commencement: 6 January 2006
- Enacting Authority: Monetary Authority of Singapore (MAS)
- 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
- Regulatory Status: Current version as at 27 March 2026 (per the provided extract)
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 regulatory carve-out from certain market conduct rules in the Securities and Futures Act (the “SFA”). In practical terms, the Regulations allow specified parties to take “stabilising action” in relation to a defined set of bonds during an initial post-issuance period, without breaching the SFA provisions that would otherwise restrict such conduct.
Market conduct rules are designed to protect investors and maintain fair and orderly markets. They typically address concerns such as manipulation, misleading price formation, and improper trading practices. However, stabilisation activities—when conducted within defined parameters—are often permitted internationally because they can reduce volatility and support orderly trading immediately after issuance of a new bond. This Regulations package reflects that policy balance: it permits stabilisation, but only for a narrowly defined bond issue, only for a limited time, and only by specified categories of persons.
Importantly, the exemption is not general. The Regulations define the “Bonds” with precision: they are a particular convertible bond issue by Lupin Limited (a 5-year zero coupon convertible bond due January 2011), with a specified maximum principal amount and conversion terms. The exemption is therefore best understood as an instrument tailored to a specific capital markets transaction, rather than a standing framework for all bond issuances.
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 6 January 2006. For practitioners, this matters when assessing whether stabilising conduct occurred within the legal window of the exemption.
2. Definitions (Section 2)
Section 2 is central because it determines the scope of the exemption. Three defined terms drive the analysis:
- “Bonds”: The Regulations define the bonds as the 5-year zero coupon convertible bonds due January 2011 issued by Lupin Limited, for a principal amount of up to US$100 million. The bonds are convertible into new ordinary shares of Lupin Limited, with a par value of 10 Indian Rupees each. This definition is transaction-specific and includes both the issuer and the economic terms.
- “securities”: This has the same meaning as in section 239(1) of the SFA. This cross-reference ensures that the SFA’s general concept of “securities” applies consistently.
- “stabilising action”: This is defined as 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.
Two practical points follow. First, the stabilisation activity is limited to actions by Merrill Lynch International or its related corporations. Second, the definition focuses on buying (or offers/agreements to buy) for stabilisation purposes. It does not expressly cover other forms of market support (for example, selling, hedging, or derivatives-related activities) unless they fall within the defined “buy/offer/agree to buy” stabilising action.
3. The exemption from SFA market conduct provisions (Section 3)
Section 3 is the operative provision. It states 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 of the Bonds, with respect to stabilising action taken by persons in three categories:
- (a) an institutional investor;
- (b) a relevant person as defined in section 275(2) of the SFA; or
- (c) a person who acquires the Bonds as principal, provided that the consideration for the acquisition 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.
In plain language, Section 3 creates a time-bound and person-bound exemption: stabilisation can occur for up to 30 days after issuance, and the exemption applies only when the stabilising action is taken by one of the specified categories. The inclusion of a minimum consideration threshold for principal acquisitions is particularly significant. It prevents small-ticket or retail-scale participation from being treated as exempt stabilisation, thereby narrowing the exemption’s reach and reducing the risk of abuse.
4. How to interpret “within 30 days from the date of issue”
Although the extract does not define “date of issue,” the phrase is typically understood as the date the bonds are issued/allocated under the offering. For compliance and litigation risk management, practitioners should confirm the transaction documentation (e.g., pricing date, issue date, settlement date, and allotment date) and map the stabilising trades against the 30-day period. If stabilising action occurs outside the window, the exemption would not apply, and the SFA provisions would potentially be engaged.
How Is This Legislation Structured?
The Regulations are structured in a straightforward, short form:
- Part/Section 1: Citation and commencement (when the Regulations take effect).
- Part/Section 2: Definitions (especially “Bonds” and “stabilising action”).
- Part/Section 3: Exemption (the legal carve-out from SFA sections 197 and 198, including the 30-day limit and the categories of eligible persons).
There are no additional parts or complex schedules in the provided extract. The Regulations operate as a targeted exemption instrument rather than a comprehensive market conduct code.
Who Does This Legislation Apply To?
The exemption is directed at stabilising action in respect of the defined Lupin Limited convertible bonds. While the definition of “stabilising action” specifies that the action is taken by Merrill Lynch International or its related corporations, the exemption in Section 3 extends to stabilising action taken with respect to eligible persons—namely institutional investors, relevant persons, and principal acquirers meeting the minimum consideration threshold.
Accordingly, the Regulations are relevant to multiple stakeholders in a bond issuance: the stabilising manager (here, Merrill Lynch International and related corporations), institutional investors participating in the stabilisation process, and any principal acquirers who may take positions in the bonds during the stabilisation period. For lawyers advising on compliance, the key is to determine whether the relevant trades fall within the defined “stabilising action,” occur within the 30-day period, and involve persons falling within Section 3(a)–(c).
Why Is This Legislation Important?
This Regulations package is important because it provides legal certainty for stabilisation activities in a specific bond transaction. Without an exemption, stabilising trades could potentially trigger prohibitions or restrictions under the SFA’s market conduct regime. By carving out stabilising action from sections 197 and 198 of the SFA (subject to strict conditions), the Regulations reduce regulatory uncertainty and enable market participants to perform stabilisation in a controlled and defensible manner.
From a practitioner’s perspective, the value of the Regulations lies in its precision. The defined “Bonds” are specific to a particular issuer, instrument type, maturity, conversion mechanics, and maximum principal amount. The definition of “stabilising action” is also specific to buying (or offers/agreements to buy) by a named stabilising entity (Merrill Lynch International) and related corporations. Finally, Section 3 imposes a time limit (30 days from issue) and eligibility constraints on who may take part, including a $200,000 minimum consideration threshold for principal acquisitions.
In enforcement terms, these constraints are likely to be the focal points for MAS supervision. If stabilisation is conducted outside the 30-day window, outside the defined bond issue, by persons not covered by Section 3, or in a manner not captured by the “buy/offer/agree to buy” stabilising definition, the exemption would not apply. That could expose participants to regulatory action under the underlying SFA provisions that the exemption otherwise disapplies.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197, 198, section 275(2) (definition of “relevant person”), and section 239(1) (definition of “securities”)
- Futures Act (referenced in the provided metadata)
- Stabilising Act (referenced in the provided metadata)
- 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) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.