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)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Citation: SL 14/2006
- Commencement: 6 January 2006
- Status: Current version as at 27 March 2026
- 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
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 plain terms, the Regulations permit specific market stabilisation activities in relation to a particular bond issue, without triggering the prohibitions that would otherwise apply.
Stabilisation is a common feature of certain bond and securities offerings. When a new issue begins trading, issuers and their financial intermediaries may take steps intended to reduce excessive volatility and support orderly trading conditions. However, stabilisation can overlap with conduct that market regulators would otherwise treat as manipulative or misleading. This is why the SFA contains market conduct provisions, and why exemptions are sometimes necessary to allow stabilisation within defined boundaries.
These Regulations are narrow and bond-specific. They define “Bonds” as a particular instrument: 5-year zero coupon convertible bonds due January 2011 issued by Lupin Limited, up to a principal amount of US$100 million, convertible into new ordinary shares of Lupin Limited. The exemption applies only to stabilising action taken within a limited time window after issuance, and only by specified categories of participants or investors.
What Are the Key Provisions?
Section 1 (Citation and commencement) is straightforward. It provides the legal name of the Regulations and states that they come into operation on 6 January 2006. For practitioners, this matters because the exemption is time-bound 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 constrains the exemption to a defined factual scenario. The Regulations define:
- “Bonds”: the specific Lupin Limited 5-year zero coupon convertible bonds due January 2011, issued up to US$100 million, convertible into new ordinary shares with a par value of 10 Indian Rupees each.
- “securities”: by reference to the SFA definition in section 239(1).
- “stabilising action”: 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 from these definitions. First, the exemption is not general-purpose; it is tied to a particular bond issue and a particular stabilisation actor (Merrill Lynch International and related corporations). Second, “stabilising action” is defined broadly to include not only actual purchases but also offers or agreements to buy—meaning that contractual commitments and conditional arrangements can fall within scope.
Section 3 (Exemption) provides the operative relief. 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, provided the stabilising action is taken with one of the following categories of counterparties/participants:
- (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, where the consideration for the acquisition is not less than $200,000 (or its equivalent in foreign currency) for each transaction, whether paid in cash or by exchange of securities or other assets.
For legal practitioners, the key compliance task is to map the stabilisation trades to these categories. The exemption is not simply “any stabilisation by Merrill Lynch.” It is stabilisation that occurs within the 30-day post-issuance period and that involves transactions with qualifying counterparties. The $200,000 threshold in Section 3(c) is particularly important where the counterparty is a principal acquirer rather than an institutional investor or a relevant person. It also raises practical documentation questions: firms should be able to evidence the consideration per transaction and the currency conversion (where applicable) and whether the consideration was paid in cash or via exchange of securities or other assets.
Although the extract does not reproduce Sections 197 and 198 of the SFA, the structure indicates that those provisions impose market conduct restrictions that would otherwise apply to dealing in securities. The Regulations therefore function as a limited statutory permission: they suspend the application of those prohibitions for the specified stabilising conduct, within specified time and counterparty parameters.
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.
- Section 2: Definitions that identify the exact bond issue and the stabilisation activity and actor.
- Section 3: The exemption clause, specifying the time window (30 days from issue), the scope of exempt conduct (stabilising action), and the qualifying categories of counterparties/investors.
There are no additional parts or schedules in the extract. The legislative design is therefore “definition-led”: once the defined terms are satisfied, Section 3 determines whether the exemption applies.
Who Does This Legislation Apply To?
In practical terms, the Regulations apply to parties involved in stabilising action in relation to the defined Lupin Limited convertible bonds. The definition of “stabilising action” points to Merrill Lynch International and its related corporations as the stabilising actor. Accordingly, the exemption is most relevant to those entities and to their dealing arrangements in the relevant bond issue.
However, Section 3 also conditions the exemption on the identity and status of the counterparty or investor involved in the stabilising transactions. The exemption extends to stabilising action taken with (i) institutional investors, (ii) “relevant persons” under the SFA, or (iii) principal acquirers meeting the $200,000 per-transaction consideration threshold. Therefore, while the stabiliser is defined, the exemption’s availability depends on the transaction counterparties and the economic terms of the acquisition.
Why Is This Legislation Important?
This Regulations is important because it illustrates how Singapore’s market conduct framework balances two competing policy objectives: (1) preventing manipulative or disorderly trading practices, and (2) allowing legitimate market stabilisation during the early trading period of certain offerings. Without an exemption, stabilisation activities—especially purchases and related commitments—could be caught by general prohibitions in the SFA, creating legal uncertainty for underwriting and distribution strategies.
From a practitioner’s perspective, the value of the Regulations lies in its precision. It is not a broad “safe harbour” for all stabilisation. Instead, it is a narrow exemption tied to a specific bond issue, a defined stabilisation actor, a defined time window, and defined counterpart categories. This means that compliance teams must conduct a careful fact-specific analysis: confirm the bond instrument matches the statutory definition; confirm the stabilisation activity is within the 30-day period from the date of issue; confirm the stabiliser is within the defined group; and confirm the counterparty/investor status and consideration threshold (where relevant).
Enforcement risk is therefore concentrated around documentation and trade classification. Firms should ensure that trading records, counterparty onboarding information, and transaction economics can support the exemption. In particular, where Section 3(c) is relied upon, evidence of the consideration per transaction (including non-cash exchanges) will be critical. Where institutional investor or “relevant person” status is relied upon, firms should ensure that the legal definitions are satisfied and that internal compliance controls can substantiate that status.
Related Legislation
- Securities and Futures Act (Cap. 289) — especially:
- Sections 197 and 198 (market conduct provisions from which the exemption applies)
- Section 275(2) (definition of “relevant person”)
- Section 337(1) (authorising power for making these Regulations)
- Section 239(1) (definition of “securities”)
- Futures Act (referenced in the provided metadata as related legislation)
- Stabilising Act (referenced in the provided metadata as related legislation)
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.