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
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Commencement: 24 June 2004
- Citation: SL 357/2004
- 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
- Status: Current version (as at 27 Mar 2026)
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 regulatory instrument that creates a narrow exemption from certain market conduct rules under the Securities and Futures Act (SFA). In plain language, it allows specified parties to take “stabilising action” in relation to a particular set of convertible notes shortly after their issuance, without breaching the SFA provisions that would otherwise restrict certain trading or market manipulation-like conduct.
The regulation is not a general “market stabilisation” regime. Instead, it is tied to a specific issuer and a specific instrument: the “7-year zero coupon convertible notes” issued by Formosa Petrochemical Corporation (up to US$250 million), convertible into new ordinary shares of that issuer. The exemption is also time-limited (within 30 days from the date of issue) and person-limited (stabilising action must be taken in relation to dealings with either a person specified in the SFA or with a “sophisticated investor”).
Practically, the regulation reflects a common feature of capital markets: underwriters and market makers may stabilise the price of newly issued securities to reduce volatility and support orderly trading. However, because stabilisation can resemble prohibited conduct if not carefully bounded, the SFA contains market conduct provisions. This subsidiary legislation carves out a controlled exception for stabilising action in respect of these particular notes.
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 when assessing whether stabilising trades occurred within the legal window created by the exemption.
Section 2 (Definitions) is central because the exemption turns entirely on whether the instrument and the conduct fall within the defined terms.
“Notes” are defined very precisely as 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 specificity means the exemption does not automatically extend to other tranches, other maturities, different issuers, or other convertible structures.
“Stabilising action” is defined as 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. Two practical implications follow:
- Only Goldman Sachs International and its related corporations are within the definition. Other dealers or arrangers cannot rely on this exemption unless they fall within the “related corporations” concept.
- The conduct must be connected to stabilisation/price maintenance. While the definition does not require a formal internal label, the purpose and effect of the trades should align with stabilisation.
Section 3 (Exemption) is the operative provision. It states that Sections 197 and 198 of the 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 dealings involving 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 plain language, Section 3 creates a “safe harbour” from the SFA’s market conduct restrictions for stabilising trades—provided the trades occur within the 30-day post-issuance period and are directed at (or involve) the permitted categories of counterparties. The exemption is therefore not only about what stabilisation is done, but also who it is done with.
For practitioners, the most important compliance tasks are typically: (i) confirming the instrument matches the definition of “Notes”; (ii) confirming the stabilising party is Goldman Sachs International or a related corporation; (iii) confirming the stabilising activity occurred within the 30-day window; and (iv) confirming the counterparty category aligns with section 274 persons or sophisticated investors under section 275(2).
How Is This Legislation Structured?
This subsidiary legislation is structured in a straightforward three-part format:
- Part/Section 1: Citation and commencement—sets the legal identity and start date.
- Part/Section 2: Definitions—defines the specific securities (“Notes”) and the specific conduct (“stabilising action”).
- Part/Section 3: Exemption—specifies that Sections 197 and 198 of the SFA do not apply to qualifying stabilising action, subject to time and counterparty conditions.
Notably, the regulations do not include detailed procedural requirements (such as notice filings or reporting obligations) within the text provided. Instead, the exemption is framed as a direct statutory carve-out, with compliance hinging on the defined scope and conditions.
Who Does This Legislation Apply To?
The exemption is designed to benefit the entities that perform stabilising action as defined. Because “stabilising action” is limited to actions taken by Goldman Sachs International (or related corporations), the practical beneficiaries are the stabilising dealer(s) and their relevant trading desks and affiliates involved in the stabilisation strategy.
However, the exemption also depends on the counterparty category for the dealings. Section 3 restricts the exemption to stabilising action “with” either a person referred to in section 274 of the SFA or a sophisticated investor under section 275(2). Accordingly, the regulation indirectly affects issuers, arrangers, and compliance teams by requiring that stabilisation-related trades be structured and documented so that counterparties fall within the permitted categories.
Why Is This Legislation Important?
This regulation is important because it provides legal certainty for a common market practice—stabilisation of newly issued securities—while maintaining the integrity of Singapore’s market conduct framework. Without such an exemption, stabilising trades could potentially be scrutinised under the SFA provisions that address improper trading and market manipulation concerns (reflected in Sections 197 and 198).
For lawyers advising underwriters, dealers, or issuers, the value lies in the precision of the carve-out. The exemption is not broad; it is instrument-specific, dealer-specific, and time-specific. That precision reduces ambiguity but increases the need for careful factual and legal mapping. A compliance failure—such as stabilising outside the 30-day period, trading in a different instrument, or dealing with a counterparty that does not qualify as a section 274 person or sophisticated investor—could expose the stabilising activity to the underlying prohibitions.
From an enforcement and risk perspective, the regulation also signals MAS’s approach: stabilisation may be permissible, but only within clearly bounded parameters. Practitioners should therefore treat this exemption as a compliance “checklist” tool. In practice, legal teams often align trading authorisations, counterparty eligibility assessments, and trade documentation with the exemption’s definitions and conditions to demonstrate that the stabilising activity falls squarely within Section 3.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly:
- Sections 197 and 198 (market conduct provisions from which the exemption applies)
- Section 274 (persons referred to for the exemption)
- Section 275(2) (definition of “sophisticated investor”)
- Section 337(1) (power to make these regulations)
- Futures Act (listed in the provided metadata as related context)
- Stabilising Act (listed in the provided metadata as related context)
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.