Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 3) Regulations 2004
- Act Code: SFA2001-S54-2004
- Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Power Used: Section 337(1) of the Securities and Futures Act
- Commencement: 5 February 2004
- Enacting Formula Date: Made on 30 January 2004
- Regulatory Authority: Monetary Authority of Singapore (MAS)
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
- Instrument Reference: SL 54/2004
- Notes (defined instrument): Fixed rate lower tier II subordinated notes due 2014 issued by Woori Bank (up to US$750 million)
- Market Conduct Exempted: Sections 197 and 198 of the Securities and Futures Act (subject to conditions)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 3) Regulations 2004 (“Stabilising Action (Notes) Regulations”) is a targeted regulatory instrument. In essence, it creates a limited exemption from certain “market conduct” rules in the Securities and Futures Act (the “SFA”) for stabilising activities carried out in relation to a specific class of debt securities—namely, fixed rate lower tier II subordinated notes issued by Woori Bank.
In plain terms, when new securities are issued, market participants sometimes undertake “stabilising action” to help manage short-term price volatility. Stabilisation is not intended to be a general permission to manipulate markets; rather, it is a controlled practice that is typically permitted only within strict boundaries and timeframes. This Regulations instrument recognises that stabilisation may be necessary for the orderly trading of the Notes, but it limits the exemption to stabilising action carried out by specified entities and only within a defined period after issuance.
Accordingly, the Regulations do not rewrite the SFA’s market conduct framework. Instead, they carve out a narrow exception: sections 197 and 198 of the SFA do not apply to qualifying stabilising action, provided the statutory conditions are met. The exemption is also time-limited—stabilising action after a 30-day post-issuance window is outside the exemption.
What Are the Key Provisions?
1. Citation and commencement (Section 1)
Section 1 provides the short title and states that the Regulations come into operation on 5 February 2004. For practitioners, this matters when assessing whether stabilising activities occurred within the legal framework created by the instrument.
2. Definitions (Section 2)
Section 2 is crucial because the exemption is only available if the activity falls within the defined scope. Two key terms are defined:
- “Notes” are defined as the fixed rate lower tier II subordinated notes due 2014 issued by Woori Bank for a principal amount of up to US$750 million. This definition is instrument-specific and caps the issuance size within the scope of the exemption.
- “stabilising action” is defined as an action taken in Singapore or elsewhere by specified stabilising entities—Credit Suisse First Boston (Europe) Limited, J. P. Morgan Securities Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated, or any of their 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 is also operational: it includes not only actual purchases but also offers or agreements to buy. It further clarifies that stabilisation may occur “in Singapore or elsewhere,” but the purpose must be to stabilise or maintain the market price of the Notes in Singapore or elsewhere.
3. The exemption from sections 197 and 198 of the SFA (Section 3)
Section 3 is the heart of the Regulations. It provides that, subject to paragraph (2), sections 197 and 198 of the SFA shall not apply to any stabilising action carried out in respect of any of the Notes with either of the following counterparties:
- (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.
This structure is significant. It means the exemption is not “open-ended” for any market participant. Stabilising action must be conducted with qualifying counterparties—either those falling within the category described in section 274, or those who qualify as “sophisticated investors” under section 275(2). Practically, this requires careful counterparty classification and documentation. If stabilising purchases or offers are made with a counterparty that does not meet these definitions, the exemption may not apply, and the underlying SFA provisions could be engaged.
4. Time limitation: 30 calendar days from issuance (Section 3(2))
Even if the counterparty condition is satisfied, the exemption does not apply to stabilising action carried out at any time after the expiry of the period of 30 calendar days from the date of issuance of the Notes. This is a bright-line rule.
For legal and compliance teams, the practical implication is that stabilisation programmes must be scheduled and monitored to ensure that any stabilising purchases, offers, or agreements to buy occur within the 30-day window. The phrase “at any time after the expiry” suggests that activities on day 31 (and beyond) are outside the exemption. Accordingly, firms should implement controls to track the issuance date and the relevant stabilisation activities.
5. Who is authorised to conduct stabilisation (via the definition)
Although Section 3 does not list the stabilising entities directly, the definition of “stabilising action” in Section 2 limits stabilisation to actions taken by the named financial institutions (Credit Suisse First Boston (Europe) Limited, J. P. Morgan Securities Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated) or their related corporations. Therefore, the exemption is effectively tied to those entities’ stabilising activity. If another party undertakes stabilisation outside the definition, the exemption would not be available.
How Is This Legislation Structured?
The Regulations are short and structured around three provisions:
- Section 1 sets out the citation and commencement date.
- Section 2 provides definitions that determine the scope of the exemption—particularly the definitions of “Notes” and “stabilising action”.
- Section 3 creates the exemption, specifying (i) the SFA provisions excluded (sections 197 and 198), (ii) the qualifying counterparties (section 274 persons or sophisticated investors under section 275(2)), and (iii) the time limit (30 calendar days from issuance).
Notably, the instrument is not organised into “Parts” or extensive schedules; it is a compact exemption regulation. This is typical for MAS instruments that grant targeted relief for specific market transactions or issuances.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action carried out in respect of the defined “Notes” by the defined stabilising entities (or their related corporations). While the exemption is framed as a relief from the application of sections 197 and 198 of the SFA, the practical beneficiaries are the stabilising participants and their compliance functions—particularly those arranging or executing stabilisation trades.
In addition, the exemption is conditional on the identity of the counterparty. Stabilising action must be carried out with either a person referred to in section 274 of the SFA or with a “sophisticated investor” as defined in section 275(2). Therefore, the Regulations indirectly impose compliance obligations on firms to ensure that counterparties are properly categorised and that stabilising activity is not conducted with ineligible investors.
Why Is This Legislation Important?
This Regulations instrument is important because it demonstrates how Singapore’s market conduct regime balances two competing objectives: (1) preventing harmful or improper market behaviour, and (2) allowing regulated stabilisation practices that support orderly trading in new issuances.
From a practitioner’s perspective, the exemption is valuable but narrow. It does not provide a general permission to stabilise. Instead, it removes the risk of breaching sections 197 and 198 of the SFA—only for stabilising action that fits precisely within the defined parameters: the specific Notes, the specified stabilising entities, qualifying counterparties, and a strict 30-day post-issuance limit.
In enforcement and compliance terms, the time limit and counterparty conditions are the most likely fault lines. If stabilising activity continues beyond 30 calendar days, the exemption falls away. Similarly, if stabilising trades are executed with counterparties that do not meet the section 274 category or the sophisticated investor definition, the exemption may not protect the conduct. Accordingly, legal counsel should advise on documentation (counterparty status), trade monitoring (issuance date and day count), and governance around stabilisation programmes.
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 — referenced in the metadata as part of the broader regulatory ecosystem (though not directly evidenced in the provided extract)
- Stabilising Act — referenced in the metadata as part of the stabilisation framework (though the provided extract is specific to the SFA and MAS regulations)
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. 3) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.