Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 12) Regulations 2004
- Act Code: SFA2001-S211-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Commencement: 20 April 2004
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
- Regulatory Body: Monetary Authority of Singapore (MAS)
- Regulation Number: SL 211/2004
- Notes Covered: 10-year guaranteed fixed rate notes due April 2014 issued by The Hongkong Land Finance (Cayman Islands) Company Limited (up to US$500 million), guaranteed by The Hongkong Land Company, Limited
- Stabilising Party: The Hongkong and Shanghai Banking Corporation Limited (and related corporations)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 12) Regulations 2004 (“the Regulations”) is a targeted regulatory instrument that creates a limited exemption from specific market conduct rules in the Securities and Futures Act (the “SFA”). In essence, it allows certain “stabilising actions” to be taken in connection with a particular bond issuance without triggering the prohibitions that would otherwise apply.
In capital markets practice, stabilisation is a mechanism used around the time of a new issue to support or maintain the market price of the securities. While stabilisation can be commercially legitimate, regulators generally treat it cautiously because it may affect price discovery and could be misused to create an artificial market. Singapore’s market conduct framework therefore restricts stabilisation activities, unless an exemption is granted.
This Regulations is narrow in scope: it applies only to stabilising actions carried out in respect of a defined set of “Notes” (a specific 10-year guaranteed fixed rate note issuance) and only where the stabilising action is taken by the specified stabilising party (HSBC and related corporations). It also imposes a strict time limit—no stabilising action is permitted after the expiry of 30 calendar days from the date of issuance.
What Are the Key Provisions?
1. Definitions (Section 2)
The Regulations define two central terms: “Notes” and “stabilising action”. The “Notes” are precisely identified as the 10-year guaranteed fixed rate notes due April 2014 issued by The Hongkong Land Finance (Cayman Islands) Company Limited, for a principal amount of up to US$500 million, guaranteed by The Hongkong Land Company, Limited. This specificity matters: the exemption is not a general stabilisation regime for all notes; it is tied to a particular issuance.
The term “stabilising action” is defined as an action taken in Singapore or elsewhere by The Hongkong and Shanghai Banking Corporation Limited, or any of its related corporations, to buy, or to offer or agree to buy, any of the Notes in order to stabilise or maintain the market price of the Notes in Singapore or elsewhere. The definition is broad enough to cover not only actual purchases but also offers or agreements to buy—reflecting that stabilisation can be implemented through conditional or planned transactions, not merely executed trades.
2. Exemption from Sections 197 and 198 of the SFA (Section 3(1))
Section 3 is the operative provision. It states that, subject to paragraph (2), sections 197 and 198 of the SFA shall not apply to any stabilising action carried out in respect of any of the Notes with respect to dealings with either (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, this means that the stabilising activity—though potentially capable of affecting market price—will not be treated as prohibited conduct under the referenced SFA provisions, provided the counterparty falls within the permitted categories. For practitioners, the key compliance task is therefore not only to establish that the transaction is “stabilising action” in the defined sense, but also to confirm that the counterparty is within the specified SFA categories (section 274 persons or sophisticated investors under section 275(2)).
3. Time-limited nature of the exemption (Section 3(2))
Section 3(2) imposes a hard stop: paragraph (1) does not apply to stabilising action carried out at any time after the expiry of the period of 30 calendar days from the date of issuance of the Notes. This is a critical limitation. Even if the counterparty is within the permitted categories and the transactions are genuinely stabilising, stabilisation conducted beyond the 30-day window would fall outside the exemption and could expose the stabilising party to liability under the SFA provisions that would otherwise be excluded.
4. Regulatory intent and compliance implications
Although the Regulations do not set out procedural requirements (such as reporting or disclosure) within the text provided, the structure indicates a classic MAS approach: carve out a narrow exemption to facilitate market functioning while preserving the general prohibition framework outside the defined conditions. For counsel, the exemption should be treated as a “safe harbour” only to the extent that all conditions are met—(i) the Notes are the specified Notes; (ii) the stabilising action is taken by the specified stabilising party or related corporations; (iii) the counterparty is within the permitted SFA categories; and (iv) the stabilisation occurs within the 30-day period.
How Is This Legislation Structured?
The Regulations are short and structured around three provisions.
Section 1 (Citation and commencement) confirms the short title and provides that the Regulations come into operation on 20 April 2004.
Section 2 (Definitions) sets out the key terms used in the exemption. This is essential because the exemption is highly specific to the Notes and to the stabilising action as defined.
Section 3 (Exemption) contains the operative legal effect. It provides the exemption from sections 197 and 198 of the SFA, subject to the counterparty categories and the 30-day limit. The exemption is therefore conditional and time-bound.
Who Does This Legislation Apply To?
The Regulations apply to stabilising actions in respect of the defined “Notes” and are directed at the persons who carry out such stabilising actions. The definition of “stabilising action” restricts the relevant conduct to actions taken in Singapore or elsewhere by The Hongkong and Shanghai Banking Corporation Limited or its related corporations. Accordingly, the exemption is not available to unrelated market participants who might otherwise attempt to stabilise the Notes.
In addition, the exemption is conditioned on the identity of the counterparty. Stabilising actions must be carried out with either a person referred to in section 274 of the SFA or with a sophisticated investor as defined in section 275(2) of the SFA. This means that even where the stabilising party is within the defined stabilising group, the exemption may not apply if the stabilising transactions are conducted with other categories of counterparties outside those SFA-defined groups.
Why Is This Legislation Important?
For market participants, the Regulations provide legal certainty for a common underwriting and issuance practice—price stabilisation—by clarifying that certain stabilising conduct will not be caught by the prohibitions in sections 197 and 198 of the SFA, provided the strict conditions are satisfied. This is important because stabilisation activities can be time-sensitive and operationally complex; counsel need to know the precise boundaries of lawful conduct to advise on transaction design, counterparty selection, and execution timing.
From an enforcement perspective, the Regulations also illustrate MAS’s balancing approach. Stabilisation can support orderly markets during issuance, but it can also distort price signals if conducted improperly or for too long. The 30-calendar-day cap is therefore a central compliance lever. It ensures that stabilisation is limited to the immediate post-issuance period when market price formation is most vulnerable to volatility and when stabilisation is most likely to be justified as part of the distribution process.
For practitioners, the most significant practical impact is the need for documentary and operational alignment with the exemption conditions. Legal teams should ensure that: (i) the instrument being dealt with is indeed the specified Notes; (ii) stabilising trades are executed by the permitted entity/entities; (iii) counterparties are verified as falling within section 274 persons or sophisticated investors under section 275(2); and (iv) all stabilising activity is completed within the 30-day window from the issuance date. Failure on any one of these points could remove the exemption and expose the stabilising party to regulatory and legal risk under the SFA provisions that the exemption otherwise disapplies.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197, 198, 274, 275(2), and the regulation-making power in section 337(1)
- Futures Act (as referenced in the legislation metadata)
- Stabilising Act (as referenced in the legislation metadata)
- Timeline (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 Notes) (No. 12) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.