Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 24) Regulations 2005
- Act Code: SFA2001-S441-2005
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289) (specifically section 337(1))
- Regulation Number: SL 441/2005
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 24) Regulations 2005
- Commencement: 6 July 2005
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (“Notes”, “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
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 24) Regulations 2005 (“Stabilising Exemption Regulations”) is a targeted regulatory instrument. In plain terms, it creates a narrow exemption from certain market conduct rules in the Securities and Futures Act (the “SFA”) for stabilising activities carried out in relation to a specific bond/notes issuance.
Market conduct provisions in the SFA are designed to prevent manipulation and unfair trading practices, including conduct that could distort the price or perceived market demand for securities. However, in some capital markets transactions—particularly where an issuer is raising funds and the notes may trade thinly at the outset—market stabilisation practices are sometimes used to reduce volatility and support orderly trading. This is where the Regulations come in: they permit specified stabilising action, but only within tightly defined boundaries.
Importantly, this is not a general stabilisation regime for all securities. The Regulations are issuance-specific and counterparty-specific. They define “Notes” as a particular 7-year fixed rate notes issuance by IndoCoal Exports (Cayman) Limited, and they define “stabilising action” as stabilisation-related dealing by a particular financial institution (Merrill Lynch, Pierce, Fenner & Smith Incorporated) or its related corporations. The exemption is also time-limited: it applies only within 30 days from the date of issue of the notes.
What Are the Key Provisions?
Section 1 (Citation and commencement) is straightforward. It provides the legal citation for the Regulations and states that they come into operation on 6 July 2005. For practitioners, this matters because the exemption is only available for stabilising action that occurs after the Regulations take effect (and, in any event, within the time window specified in section 3).
Section 2 (Definitions) is the heart of the instrument because it determines the scope of the exemption. Two defined terms are critical:
- “Notes” means the 7-year fixed rate notes due July 2012 issued by IndoCoal Exports (Cayman) Limited, for a principal amount of up to US$600 million.
- “stabilising action” means an action taken in Singapore or elsewhere by Merrill Lynch, Pierce, Fenner & Smith Incorporated (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.
From a compliance perspective, these definitions mean that the exemption is not available to any stabilising dealer. It is limited to the named stabiliser (Merrill Lynch group) and to the specified notes issuance. If a different institution performs similar stabilisation, or if the notes are outside the defined issuance parameters, the exemption would not apply.
Section 3 (Exemption) provides the operative legal effect. 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, with respect to dealings made with either:
- a person referred to in section 274 of the Act; or
- a sophisticated investor as defined in section 275(2) of the Act.
Although the text provided does not reproduce sections 197, 198, 274, or 275(2), the structure indicates that sections 197 and 198 are the market conduct provisions that would otherwise restrict or prohibit the relevant dealing conduct. The exemption therefore functions as a carve-out: stabilising action that meets the defined conditions is treated as not falling within the prohibitions (or restrictions) in those sections.
Two practical constraints embedded in section 3 are especially important:
- Time constraint: the stabilising action must occur within 30 days from the date of issue. This is a common feature of stabilisation exemptions—regulators typically allow stabilisation only during the initial period when price discovery is most volatile.
- Counterparty constraint: the exemption applies only where the stabilising dealings are with section 274 persons or with sophisticated investors. This indicates a policy choice to limit stabilisation dealing to counterparties that are presumed to have the knowledge and capacity to understand the risks and mechanics of such transactions.
For legal practitioners, the counterparty limitation is often where implementation fails. Even if the stabiliser and the notes are correct, the exemption may be unavailable if the stabilising trades are executed with counterparties that do not fall within the specified categories.
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 (procedural)
- Section 2: Definitions (scope-setting)
- Section 3: Exemption (substantive carve-out)
There are no additional Parts or schedules in the extract provided. The drafting approach is typical of targeted exemptions: it defines the relevant instrument and conduct, then provides a narrow carve-out from specific SFA provisions, subject to time and counterparty conditions.
Who Does This Legislation Apply To?
In practical terms, the Regulations apply to stabilising action taken by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its related corporations, in relation to the defined IndoCoal 7-year fixed rate notes due July 2012 (up to US$600 million). The exemption is therefore aimed at the market intermediary(s) conducting stabilisation in connection with that specific issuance.
However, the exemption’s effect is also conditional on who the stabilising trades are with. Section 3 restricts the exemption to stabilising dealings with persons referred to in section 274 of the SFA or with sophisticated investors under section 275(2) of the SFA. Accordingly, issuers, arrangers, and dealers should ensure that trade documentation, investor eligibility checks, and execution records align with these categories.
Why Is This Legislation Important?
This Regulations matters because it clarifies when otherwise prohibited or restricted market conduct rules do not apply. For practitioners advising on note issuances, stabilisation arrangements, or dealer conduct, the Regulations provide legal certainty for a limited set of stabilising activities—reducing the risk that stabilisation trades could be treated as breaches of the SFA’s market conduct provisions.
From a market integrity perspective, the exemption is carefully bounded. The regulator allows stabilisation only for a specific notes issuance, only by a specified stabiliser group, only within a defined post-issue window, and only with specified categories of counterparties. These constraints reflect the balancing act between (i) permitting orderly market functioning and (ii) preventing manipulation.
In day-to-day practice, the Regulations typically affect:
- Deal documentation (stabilisation language, dealer authority, and compliance representations);
- Trade execution and record-keeping (ensuring trades occur within the 30-day window and with eligible counterparties);
- Investor eligibility processes (confirming sophisticated investor status or section 274 category membership); and
- Regulatory risk management (assessing whether the conduct fits the definition of “stabilising action” and whether any trades fall outside the exemption).
Because the exemption is narrow, counsel should not treat it as a template for other issuances. Each stabilisation exemption in Singapore is typically issuance-specific and may differ in the defined notes, stabiliser, time window, or counterparty categories.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular 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)
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. 24) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.