Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 18) Regulations 2004
- Act Code: SFA2001-S278-2004
- Type: Subsidiary Legislation (sl)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting power: Section 337(1) of the Securities and Futures Act
- Commencement: 14 May 2004
- Regulation number: SL 278/2004
- Status (as provided): Current version as at 27 Mar 2026
- Key provisions: Regulation 1 (Citation and commencement); Regulation 2 (Definitions); Regulation 3 (Exemption)
- Relevant Act provisions referenced: Sections 197 and 198 (market conduct restrictions), and sections 274 and 275(2) (categories of persons), plus the stabilising framework context
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 18) Regulations 2004 is a targeted regulatory instrument. In essence, it creates a narrow exemption from certain market conduct rules in the Securities and Futures Act (“SFA”) for stabilising activities carried out in relation to a specific bond issuance: the “5-year zero coupon convertible notes due May 2009” issued by SK Telecom Co., Ltd.
In plain language, the Regulations recognise that, in some capital markets transactions, market participants may need to take “stabilising action” to help maintain orderly trading conditions and reduce excessive price volatility immediately after issuance. However, stabilising conduct can overlap with statutory prohibitions or restrictions on market manipulation and improper dealing. This Regulations resolves that tension by carving out an exemption—so that stabilising actions can be undertaken lawfully, provided the conditions are met.
Because the Regulations define the Notes and the stabilising actors very specifically, it is best understood as a transaction-specific exemption rather than a general permission for stabilisation in all securities. For practitioners, the key work is therefore to map the stabilising activity to the defined Notes, confirm the identity of the stabilising parties, and ensure the timing and counterparty conditions are satisfied.
What Are the Key Provisions?
Regulation 1 (Citation and commencement) is straightforward. It provides the short title and states that the Regulations come into operation on 14 May 2004. For compliance purposes, this matters because the exemption is only relevant to stabilising actions carried out after the Regulations are in force (unless the transaction timeline otherwise provides for earlier conduct, which is not indicated in the extract).
Regulation 2 (Definitions) is the heart of the instrument because it tightly constrains what counts as “Notes” and what counts as “stabilising action.” The definition of “Notes” is highly specific: it refers to the 5-year zero coupon convertible notes due May 2009 issued by SK Telecom Co., Ltd. for a principal amount of up to US$700 million. It also specifies the conversion mechanics: the notes are convertible into either (a) common shares of SK Telecom with a par value of Won 500 each, or (b) American Depositary Shares representing those common shares.
The definition of “stabilising action” is equally constrained. It means an action taken in Singapore or elsewhere by Credit Suisse First Boston (Europe) Limited, Lehman Brothers International (Europe), or any of their 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. This definition is important for two reasons. First, it limits the permitted stabilising conduct to buying (including offers or agreements to buy), not selling or other forms of market support. Second, it restricts the stabilising actors to named entities and their related corporations.
Regulation 3 (Exemption) sets out the legal effect. The exemption is expressed as follows: sections 197 and 198 of the SFA shall not apply to any stabilising action carried out in respect of the Notes, subject to the conditions in paragraphs (1) and (2).
Paragraph (1) provides that the exemption applies only if the stabilising action is carried out with a person who falls 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. While the extract does not reproduce those definitions, the practitioner’s takeaway is clear: stabilising trades must be directed to eligible counterparties. This is a classic regulatory design—permitting stabilisation while limiting it to professional or otherwise qualified market participants, thereby reducing the risk of retail harm or unfair dealing.
Paragraph (2) imposes a strict timing limitation. The exemption 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 compliance checkpoint. Even if the stabilising actor and counterparty qualify, stabilisation conducted beyond the 30-day window would fall outside the exemption and would therefore expose the conduct to the underlying SFA provisions (sections 197 and 198) that the exemption otherwise disapplies.
In practice, this means that transaction counsel and compliance teams should implement controls to (i) identify the issuance date, (ii) calculate the 30 calendar day deadline precisely, (iii) monitor stabilising orders and trades for timing, and (iv) confirm that counterparties are within the section 274 or sophisticated investor categories.
How Is This Legislation Structured?
The Regulations are structured as a short, three-regulation instrument:
Regulation 1 contains the citation and commencement provision.
Regulation 2 provides definitions for the two operative terms—“Notes” and “stabilising action”—thereby limiting the scope of the exemption to a specific convertible note issuance and to stabilising purchases by specified financial institutions (and their related corporations).
Regulation 3 is the operative exemption clause. It disapplies sections 197 and 198 of the SFA to qualifying stabilising action, but only when the stabilising action is conducted with eligible persons (section 274 persons or sophisticated investors) and only within the 30 calendar day period from issuance.
Who Does This Legislation Apply To?
This legislation applies to stabilising actions in relation to the defined SK Telecom convertible notes. The exemption is not available to any stabilisation activity in general; it is available only to stabilising actions that meet the definition in Regulation 2—namely, actions taken by Credit Suisse First Boston (Europe) Limited, Lehman Brothers International (Europe), or their related corporations, to buy (or offer/agree to buy) the Notes to stabilise or maintain market price.
It also applies only when the stabilising action is undertaken with counterparties who qualify under the SFA framework: persons referred to in section 274 or sophisticated investors under section 275(2). Therefore, the Regulations impose a practical constraint on who can be on the other side of stabilising trades. For market participants, this means that documentation, trade confirmations, and counterparty eligibility checks are essential to preserve the exemption.
Why Is This Legislation Important?
For practitioners, the significance of these Regulations lies in how they reconcile two competing regulatory objectives: (1) allowing legitimate stabilisation in connection with securities offerings, and (2) enforcing market conduct rules that prevent manipulation or improper dealing. By disapplying sections 197 and 198 of the SFA, the Regulations provide legal certainty to stabilising participants—reducing the risk that stabilisation, even when intended to support orderly markets, could be treated as unlawful market conduct.
However, the exemption is narrow and conditional. The defined scope of “Notes” and “stabilising action” means that compliance teams cannot treat it as a template for other issuances. The counterparty eligibility requirement (section 274 persons or sophisticated investors) and the strict 30-day post-issuance limit create clear operational duties: eligibility must be verified, and stabilisation must be time-bounded.
From an enforcement and risk perspective, the timing limitation in particular is a frequent source of compliance failure in practice. Stabilisation programmes can evolve as market conditions change; without careful monitoring, stabilising activity may inadvertently continue beyond the permitted window. This Regulations therefore functions as both a permission and a compliance discipline: it permits stabilisation only within a defined period and only with qualified counterparties.
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 provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Timeline (as referenced in the provided 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. 18) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.