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
- Legislation Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (notably section 337(1))
- Commencement: 24 June 2004
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory Focus: Exemption from market conduct prohibitions for specified “stabilising action” in relation to specified “Notes”
- Instrument Number: SL 358/2004
- Status: Current version as at 27 Mar 2026 (per the platform extract)
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 is a targeted regulatory instrument. In plain terms, it creates a narrow exemption that allows certain market participants to take “stabilising action” in relation to a particular issuance of exchangeable notes, without triggering specific prohibitions in the Securities and Futures Act (SFA).
Stabilisation is a practice commonly used in capital markets to help manage volatility immediately after issuance. In many jurisdictions, stabilising purchases may be permitted under strict conditions because they are intended to support orderly trading and reduce extreme price swings. However, without an exemption, stabilising activity can be caught by market conduct rules that prohibit manipulation or other improper dealing.
This Regulations instrument therefore carves out an exception from the operation of sections 197 and 198 of the SFA for stabilising actions taken within a defined time window and by defined persons, in respect of defined notes. The regulatory design is deliberately specific: it identifies the exact notes, the exact stabiliser, and the exact class of counterparties (or investor type) that may be involved.
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 when assessing whether stabilising activity occurred within the legal framework in force at the time.
Section 2 (Definitions) is central because the exemption is only as broad as the defined terms. Two definitions drive the scope:
(a) “Notes” are defined very precisely as the 7-year zero coupon exchangeable notes due June 2011 issued by Formosa Plastics Corporation for a principal amount of up to US$250 million. These notes are exchangeable into existing ordinary shares of Formosa Petrochemical Corporation with a par value of NT$10 each. This specificity means the exemption is not available for other note issuances, even if they are similar in structure.
(b) “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. The definition therefore restricts both the actor (Goldman Sachs International and related corporations) and the purpose (stabilisation/price maintenance), and it also covers not only actual purchases but also offers or agreements to buy.
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 being permitted if it is taken with either:
- (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.
In practical terms, Section 3 creates a time-limited and counterparty-limited exemption. Even if Goldman Sachs (or a related corporation) undertakes stabilising purchases, the exemption only applies if the stabilising activity occurs within 30 days from the date of issue and the stabilising trades are conducted with the permitted categories of counterparties.
Why the counterparty limitation matters: market conduct rules often aim to prevent unfair trading practices and manipulation. By limiting the exemption to transactions with persons identified in section 274 or with sophisticated investors, the Regulations reduce the risk that stabilisation becomes a vehicle for improper influence over retail or less informed participants. For counsel, this means transaction documentation and trade counterparties must be checked against the statutory categories.
What is being exempted: the Regulations do not repeal sections 197 and 198; they suspend their application to the specified stabilising action. Accordingly, stabilisation outside the exemption parameters (for example, beyond the 30-day period, with the wrong counterparty type, or in relation to different notes) may still attract liability under the SFA.
How Is This Legislation Structured?
The Regulations are structured in a straightforward, minimal format typical of targeted exemptions:
- Section 1 sets out citation and commencement.
- Section 2 provides definitions that precisely delimit the scope of “Notes” and “stabilising action”.
- Section 3 contains the exemption from the application of specified SFA provisions (sections 197 and 198), subject to time and counterparty conditions.
Notably, the instrument contains no additional procedural requirements in the extract provided. The legal effect is therefore achieved through the defined scope and the exemption conditions in Section 3.
Who Does This Legislation Apply To?
This Regulations instrument applies to stabilising activity that falls within the defined “stabilising action” and “Notes”. In other words, it is not a general authorisation for any market participant to stabilise any security. The exemption is tied to Goldman Sachs International (and its related corporations) acting in Singapore or elsewhere, and to the specific Formosa Plastics exchangeable notes described in Section 2.
As to counterparties, the exemption is available only where the stabilising action is taken with either a person referenced in section 274 of the SFA or with a sophisticated investor under section 275(2). Practitioners should therefore treat the counterparty category as a compliance gate: the exemption’s protection depends on who the stabiliser trades with, not merely on what it does.
Why Is This Legislation Important?
For capital markets practitioners, this Regulations instrument is important because it clarifies when stabilising conduct can be undertaken without breaching market conduct prohibitions. Stabilisation is often time-sensitive and operationally complex. A clear exemption reduces legal uncertainty for the stabilising manager and its related entities during the immediate post-issuance period.
From a compliance perspective, the Regulations provide a narrow safe harbour. The safe harbour is narrow because it is limited by (i) the exact notes covered, (ii) the exact stabiliser (Goldman Sachs International and related corporations), (iii) the time window (within 30 days from issue), and (iv) the permitted counterparty categories (section 274 persons or sophisticated investors). This structure reflects a regulatory balancing act: permitting stabilisation to support orderly trading while maintaining safeguards against market abuse.
For enforcement and risk management, the Regulations also imply that stabilisation outside the exemption parameters may remain unlawful. Counsel advising on stabilisation programmes should therefore implement controls to verify: the issuance date (to calculate the 30-day period), the identity and status of counterparties, and whether the activity is truly “to stabilise or maintain the market price” (as opposed to other trading objectives). Where stabilising activity is conducted in multiple jurisdictions (“in Singapore or elsewhere”), practitioners should also ensure that the conduct aligns with the definition and exemption conditions.
Finally, because the instrument is a subsidiary regulation made under the SFA’s enabling provision (section 337(1)), it illustrates how MAS can tailor exemptions to specific transactions. This is a useful precedent for understanding how similar exemptions may be structured for other issuances, and how practitioners should read exemption instruments as transaction-specific compliance tools rather than broad market-wide permissions.
Related Legislation
- Securities and Futures Act (SFA) (Cap. 289) — including sections 197, 198, 274, 275(2), and the enabling provision in section 337(1)
- Futures Act (as referenced in the platform metadata)
- Stabilising Act (as referenced in the platform metadata)
- Timeline (legislation versioning reference on the platform)
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.