Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 23) Regulations 2005
- Act Code: SFA2001-S440-2005
- Legislative Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (specifically, section 337(1))
- Regulation Number: SL 440/2005
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 23) Regulations 2005
- Commencement: 6 July 2005
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (including “Notes” and “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the Securities and Futures Act for specified stabilising action
- 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 Notes) (No. 23) Regulations 2005 (“Stabilising Action Exemption Regulations”) creates a targeted regulatory carve-out from certain market conduct rules in the Securities and Futures Act (SFA). In plain terms, it allows a specific financial institution to take limited “stabilising action” in relation to a particular set of notes issued by Hynix Semiconductor Inc., without breaching the SFA provisions that would otherwise apply.
Market conduct rules are designed to protect investors and market integrity by restricting manipulative or misleading trading practices. However, in certain capital markets transactions—particularly bond and note issuances—stabilisation activities may be permitted because they can support orderly trading and reduce volatility in the immediate aftermath of issuance. This legislation reflects that policy balance: it permits stabilisation, but only within tightly defined parameters.
Importantly, the exemption is not general. It is narrowly defined by (i) the identity and characteristics of the “Notes”, (ii) the identity of the stabilising party (Deutsche Bank Securities Inc. and its related corporations), and (iii) the time window (within 30 days from the date of issue). It also limits the beneficiaries of the exemption to certain counterparties (persons referred to in section 274 of the SFA, or sophisticated investors as defined in section 275(2) of the SFA).
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states that they came into operation on 6 July 2005. For practitioners, this is relevant when assessing whether stabilising conduct occurred within the legal framework applicable at the time.
Section 2 (Definitions) is central because the exemption turns on the defined scope of both the instruments and the conduct. The Regulations define:
- “Notes” as either:issued by Hynix Semiconductor Inc.
- US$ fixed rate notes due 2012 with a principal amount of up to US$1 billion; or
- US$ floating rate notes due 2012 with a principal amount of up to US$1 billion,
- “stabilising action” as an action taken in Singapore or elsewhere by Deutsche Bank Securities Inc. (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.
Two practical points flow from these definitions. First, the exemption is instrument-specific: it applies only to the specified Hynix notes (fixed and floating, due 2012, and within the stated principal amount cap). Second, the conduct definition includes not only actual purchases but also offers or agreements to buy—meaning that contractual commitments or conditional arrangements may fall within “stabilising action” if they are intended to stabilise or maintain price.
Section 3 (Exemption) 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 Notes within 30 days from the date of issue, provided the stabilising action is taken 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.
In effect, Section 3 creates a time-limited and counterparty-limited safe harbour. Even if the stabilising party and the notes match the definitions, the exemption will not apply unless the stabilising activity occurs within the 30-day post-issuance period and is conducted with eligible counterparties.
For legal and compliance teams, the key compliance tasks typically include: (i) verifying the issuance date and calculating the 30-day window; (ii) confirming that the notes traded are within the defined “Notes” category; (iii) confirming that the stabilising activity is undertaken by Deutsche Bank Securities Inc. or its related corporations; and (iv) documenting that the counterparty is within the relevant SFA categories (section 274 persons or sophisticated investors under section 275(2)).
How Is This Legislation Structured?
The Regulations are structured as a short, three-section instrument:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that determine the scope of the exemption—particularly the defined terms “Notes” and “stabilising action”.
- Section 3 contains the exemption, specifying which SFA provisions are disapplied, the time limit, and the eligible counterparties.
There are no additional parts or complex schedules in the extract provided. The legislative design is therefore “precision drafting”: it defines the eligible instruments and conduct, then applies a narrow exemption with clear temporal and counterparty limits.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA and relate to market conduct rules, the exemption is effectively directed at a particular stabilising actor and transaction. The exemption applies to stabilising action taken by Deutsche Bank Securities Inc. or its related corporations in relation to the defined Hynix notes.
In addition, the exemption is conditional on the stabilising action being taken with eligible counterparties: either persons referred to in section 274 of the SFA or sophisticated investors under section 275(2). This means that even where stabilising trading occurs within the 30-day window, the exemption may fail if the counterparty does not fall within the specified categories. Practitioners should therefore treat counterparty classification as a gating requirement for reliance on the exemption.
Why Is This Legislation Important?
From a market integrity perspective, stabilisation activities can appear—at least superficially—to resemble trading intended to influence price. The SFA’s market conduct provisions (including the provisions referenced by sections 197 and 198) are designed to prevent manipulation and protect investors. This Regulations instrument is important because it provides a legally recognised pathway for stabilisation in a controlled context.
For practitioners advising issuers, lead managers, or trading desks, the Regulations offer a compliance framework for bond/note issuance stabilisation. It clarifies that certain stabilising purchases (and even offers or agreements to buy) may be undertaken without triggering the disapplied SFA provisions, but only when the activity is tightly scoped to the defined notes, the defined stabiliser, and the defined time period and counterparties.
In practical terms, this legislation supports transaction execution by reducing legal uncertainty. Without an exemption, stabilising bids or purchases could expose firms to regulatory risk and potential enforcement. With the exemption, firms can plan stabilisation strategies—subject to careful documentation and controls—while remaining within the boundaries of the SFA’s market conduct framework.
Related Legislation
- Securities and Futures Act (SFA) (Cap. 289) — in particular, the referenced provisions:
- Section 197 and Section 198 (disapplied by the exemption)
- Section 274 (persons eligible for the exemption)
- Section 275(2) (definition of “sophisticated investor”)
- Section 337(1) (power to make these Regulations)
- Futures Act (referenced in the provided metadata as related legislation)
- Stabilising Act (referenced in the provided metadata as related legislation)
- Timeline / legislative timeline materials (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. 23) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.