Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 26) Regulations 2004
- Act Code: SFA2001-S358-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting power: Section 337(1) of the Securities and Futures Act
- Commencement: 24 June 2004
- Regulatory status: Current version as at 27 March 2026 (per the legislation portal)
- Key provisions: Section 1 (Citation and commencement); Section 2 (Definitions); Section 3 (Exemption)
- Regulatory focus: Exemption from market conduct provisions for “stabilising action” relating to specified notes
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 26) Regulations 2004 (“Stabilising Action Exemption Regulations”) is a targeted exemption instrument made under the Securities and Futures Act (SFA). In plain language, it allows certain market participants to take stabilising steps in connection with a specific issuance of exchangeable notes without being caught by particular market conduct prohibitions in the SFA.
Stabilisation is a common feature of securities offerings. When new securities are issued, issuers and their advisers may take steps to support or stabilise the trading price in the immediate aftermath of issuance. However, market conduct rules are designed to prevent manipulation and unfair trading practices. This Regulations bridges that tension by carving out a narrow exemption for stabilising action, but only for a defined set of notes, a defined stabiliser, and a defined time window.
Importantly, the exemption is not general. It is tied to a particular instrument: “7-year zero coupon exchangeable notes due June 2011” issued by Formosa Plastics Corporation, exchangeable into existing ordinary shares of Formosa Petrochemical Corporation. The Regulations also define who may take the stabilising action and when it may occur. This makes the instrument highly relevant for practitioners advising on offering documentation, compliance with market conduct rules, and the structuring of stabilisation activities.
What Are the Key Provisions?
Section 1: Citation and commencement provides the short title and states that the Regulations come into operation on 24 June 2004. For practitioners, this matters because the exemption’s availability depends on the timing of stabilising action relative to the issuance date and the statutory time window. While the Regulations themselves commence on 24 June 2004, the operative exemption in section 3 is framed by “within 30 days from the date of issue of the Notes”.
Section 2: Definitions sets the boundaries of the exemption. Two defined terms are central:
- “Notes” are precisely identified: the 7-year zero coupon exchangeable notes due June 2011 issued by Formosa Plastics Corporation for up to US$250 million, exchangeable into existing ordinary shares of Formosa Petrochemical Corporation with a par value of NT$10 each.
- “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.
This definition is practitioner-critical because it limits the exemption to stabilisation activities that involve buying (or commitments to buy) and are undertaken by the specified stabiliser group. It also clarifies that stabilising action may occur both in Singapore and internationally, reflecting the cross-border nature of many offerings and secondary market trading.
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 stabilising action undertaken in one of two categories of counterparties.
While the extract does not reproduce sections 197 and 198, the structure indicates that those sections contain market conduct restrictions that would otherwise apply to dealings in securities. The exemption therefore functions as a statutory “safe harbour” for stabilisation, but only within the specified parameters.
The exemption is limited to stabilising action taken within the 30-day post-issuance period with:
- (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 compliance perspective, this is a key constraint: stabilising action must be conducted with eligible counterparties. Practitioners should therefore verify (i) the identity and regulatory classification of the counterparty, and (ii) whether the counterparty falls within the relevant category in section 274 or meets the statutory definition of sophisticated investor in section 275(2). This is often where offering counsel and compliance teams focus their diligence, because the exemption’s availability can turn on documentation and investor classification.
Finally, the Regulations are “Made” on 21 June 2004 by the Monetary Authority of Singapore (MAS), with the signature of the Managing Director. This confirms MAS’s role in granting the exemption under the statutory power in section 337(1) of the SFA.
How Is This Legislation Structured?
The Regulations are short and structured as a conventional set of subsidiary legislation provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that define the scope of “Notes” and “stabilising action”.
- Section 3 contains the exemption from specified SFA provisions (sections 197 and 198), including the time limit (30 days from issue) and the eligible counterparty categories (section 274 persons or sophisticated investors under section 275(2)).
Notably, the Regulations do not create additional procedural requirements in the extract provided (e.g., notice, reporting, or conditions). Instead, the exemption is framed through definitional precision and a narrow carve-out. In practice, however, stabilisation programmes may still require compliance with other regulatory obligations under the SFA and related market conduct frameworks, even if sections 197 and 198 are disapplied for the exempted stabilising action.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action taken in relation to the specified “Notes” (the Formosa exchangeable notes) and undertaken by Goldman Sachs International or its related corporations. This means the exemption is not available to other dealers or stabilisers unless they fall within the defined stabiliser group.
In addition, the exemption is conditional on the stabilising action being carried out within 30 days from the date of issue and being conducted with eligible counterparties: persons referred to in section 274 of the SFA or sophisticated investors under section 275(2). Therefore, even where the stabiliser is within the defined group, the exemption may not apply if the stabilising trades are executed with counterparties outside those categories.
Why Is This Legislation Important?
This Regulations is important because it provides a narrowly tailored legal basis for stabilisation activities in Singapore in connection with a specific securities issuance. For issuers, lead managers, and trading desks, stabilisation can be commercially significant—particularly in the immediate post-issuance period when liquidity and price discovery are still developing. Without an exemption, stabilisation activities could risk contravening market conduct provisions designed to prevent manipulation.
From an enforcement and risk perspective, the exemption reduces uncertainty by disapplying the relevant SFA provisions (sections 197 and 198) for the defined stabilising action. However, the exemption is not a blanket permission to trade. It is time-bound (30 days from issue), instrument-specific (the defined Notes), actor-specific (Goldman Sachs International and related corporations), and counterparty-specific (section 274 persons or sophisticated investors). Practitioners should treat these as “gates” that must all be satisfied.
In practical terms, lawyers advising on stabilisation programmes should ensure that:
- Trade documentation clearly reflects that the activity is stabilising action as defined (buying or offers/agreements to buy to stabilise or maintain market price).
- Timing controls are implemented to ensure stabilising action occurs only within the 30-day window from the date of issue.
- Counterparty eligibility is verified and evidenced (whether the counterparty is within section 274 or qualifies as a sophisticated investor under section 275(2)).
- Scope alignment is maintained so that only the specified Notes are involved.
Even with the exemption, counsel should also consider whether other regulatory provisions (not disapplied by this Regulations) could still apply to stabilisation activities, including general market conduct requirements, disclosure obligations, and any other SFA provisions governing dealing, communications, or market abuse. The exemption’s legal effect is limited to sections 197 and 198, so a holistic compliance review remains necessary.
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 legislation metadata)
- Stabilising Act (as referenced in the legislation metadata)
- Timeline (legislation portal reference for version control)
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. 26) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.