Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 25) Regulations 2004
- Act Code: SFA2001-S357-2004
- Type: Subsidiary legislation (SL)
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Authorising Act: Securities and Futures Act (Cap. 289) — power under section 337(1)
- Citation: SL 357/2004
- Commencement: 24 June 2004
- Status: Current version (as at 27 Mar 2026)
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions of “Notes” 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 Notes) (No. 25) Regulations 2004 is a targeted exemption regulation. In plain terms, it allows certain market participants to take “stabilising action” in relation to a very specific issuance of convertible notes—without triggering particular market conduct prohibitions in the Securities and Futures Act.
Stabilisation is a common feature of capital markets transactions. When new securities are issued, issuers and their advisers may seek to support orderly trading and reduce volatility in the immediate aftermath of issuance. However, stabilising purchases can resemble prohibited market manipulation if not carefully carved out. This regulation therefore creates a narrow legal safe harbour for stabilising activity, but only for a defined set of notes, a defined stabilisation actor, and a limited time window.
Importantly, the exemption is not general. It is tied to a particular instrument: the 7-year zero coupon convertible notes due June 2011 issued by Formosa Petrochemical Corporation, up to a specified principal amount, and convertible into ordinary shares of Formosa Petrochemical Corporation. The regulation also defines stabilising action as specific buying or offers to buy undertaken by Goldman Sachs International (or its related corporations) in Singapore or elsewhere.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal legal identity of the regulations and states that they come into operation on 24 June 2004. 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” condition in section 3.
Section 2 (Definitions) is central because it tightly constrains the scope of the exemption. Two defined terms do the work:
(1) “Notes” are defined with precision. They are the 7-year zero coupon convertible notes due June 2011 issued by Formosa Petrochemical Corporation for a principal amount of up to US$250 million. The notes are convertible into new ordinary shares of Formosa Petrochemical Corporation with a par value of NT$10 each. This level of specificity means the exemption is not available for other tranches, other issuers, or different terms—even if they are similar convertible notes.
(2) “stabilising action” is also narrowly defined. It means an action taken in Singapore or elsewhere by Goldman Sachs International (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. This definition is significant for two reasons. First, it limits the stabilisation actor to Goldman Sachs International and its related corporations. Second, it includes not only actual purchases but also offers or agreements to buy—so compliance teams must consider communications and conditional commitments, not merely executed trades.
Section 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the Securities and Futures Act 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 stabilising action taken by or involving:
- (a) a person referred to in section 274 of the Act; or
- (b) a sophisticated investor as defined in section 275(2) of the Act.
From a practitioner’s perspective, the key legal effect is that the market conduct prohibitions in sections 197 and 198 are carved out for the specified stabilising activity. While the extract provided does not reproduce the text of sections 197 and 198, those provisions typically relate to prohibitions on market manipulation and improper conduct affecting securities markets. The exemption therefore functions as a safe harbour: stabilising purchases (and related offers/agreements to buy) may be lawful even if they would otherwise fall within the conduct described by the prohibitions.
The exemption is also conditional. Three conditions must be satisfied simultaneously:
- Instrument condition: the activity must be in respect of the defined “Notes”.
- Time condition: the stabilising action must be taken within 30 days from the date of issue.
- Counterparty/person condition: the stabilising action must be taken with a person falling within section 274 of the Act or with a sophisticated investor under section 275(2).
Practically, this means that compliance cannot be satisfied by “having a stabilisation programme” in general. The programme must be mapped to the exact instrument, the exact permitted actors, and the exact permitted counterparties, and it must be executed within the statutory time window.
How Is This Legislation Structured?
The regulations are structured as a short instrument with three substantive provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that define the scope of the exemption (the specific “Notes” and the defined “stabilising action”).
- Section 3 contains the exemption from specified Securities and Futures Act provisions (sections 197 and 198), subject to the 30-day limit and the specified categories of persons/investors.
Because the instrument is concise, practitioners should treat it as a “scope and carve-out” regulation rather than a comprehensive market conduct regime. It operates by reference to the Securities and Futures Act and by defining a narrow set of factual circumstances in which the carve-out applies.
Who Does This Legislation Apply To?
Although the regulations are made under the Securities and Futures Act, their practical application is directed at parties involved in the issuance and trading of the defined convertible notes. The exemption is relevant primarily to the stabilisation manager and its related corporations—here, Goldman Sachs International and its related corporations—because the definition of “stabilising action” is limited to actions taken by that group.
In addition, the exemption is conditioned on the involvement of a person within section 274 of the Act or a sophisticated investor under section 275(2). This means that even if stabilising trades are executed by the permitted stabilisation actor, the exemption may not apply if the stabilising activity is carried out in a manner that does not satisfy the statutory person/investor categories.
Why Is This Legislation Important?
This regulation is important because it illustrates how Singapore’s market conduct framework balances two competing objectives: (1) preventing manipulation and improper trading practices, and (2) permitting legitimate stabilisation practices in connection with securities offerings. Without an exemption, stabilising purchases could create legal risk for market intermediaries and could chill standard underwriting and post-issuance support mechanisms.
For practitioners advising issuers, underwriters, and trading desks, the regulation provides a narrow safe harbour. However, it also imposes discipline. The exemption is limited to a specific instrument and a limited period (30 days from issue). It also requires careful attention to counterparties and investor status—particularly the statutory meaning of “sophisticated investor” and the category of persons referenced in section 274.
From an enforcement and compliance standpoint, the regulation’s definitions are critical. Because “stabilising action” includes not only purchases but also offers or agreements to buy, compliance monitoring should cover communications and trade intent, not merely executed transactions. Documentation should clearly link stabilising trades to the purpose of stabilising or maintaining the market price of the notes, and records should demonstrate that the trades occurred within the permitted 30-day window.
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 (legislation timeline reference 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. 25) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.