Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 34) Regulations 2004
- Act Code: SFA2001-S481-2004
- Type: Subsidiary Legislation (sl)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Authorising Provision: Section 337(1) of the Securities and Futures Act
- Commencement: 11 August 2004
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Regulations: Sections 1 to 3 (with key operative provisions in section 3)
- Key Provisions:
- 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 in respect of specified Notes
- Legislative Instrument Number: SL 481/2004
- Notes (as defined): Guaranteed senior fixed rate notes issued by Sino-Forest Corporation in August 2004 (up to US$350 million), guaranteed by subsidiaries (excluding PRC-incorporated subsidiaries)
- Stabiliser (as defined): Morgan Stanley & Co. Inc. or related corporations
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 34) Regulations 2004 is a targeted regulatory instrument made by the Monetary Authority of Singapore (MAS). In plain terms, it creates a narrow exemption that allows certain market participants to take “stabilising action” in relation to a particular issuance of notes without breaching specific market conduct rules in the Securities and Futures Act (“SFA”).
The legislation is not a general framework for stabilisation. Instead, it is designed for a specific set of circumstances: stabilising transactions in respect of “Notes” issued by Sino-Forest Corporation in August 2004, and stabilising actions taken by Morgan Stanley & Co. Inc. (or its related corporations). The exemption is time-limited and applies only within a defined window after the notes are issued.
At a practitioner level, the Regulations matter because stabilisation activities can otherwise trigger prohibitions or restrictions under the SFA—particularly those intended to prevent market manipulation, misleading conduct, or improper dealing practices. By carving out an exemption, MAS permits stabilisation that is consistent with market practice in primary offerings, while still maintaining the overall integrity of Singapore’s securities and futures markets.
What Are the Key Provisions?
Section 1 (Citation and commencement) confirms the legal identity of the instrument and its effective date. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 34) Regulations 2004” and come into operation on 11 August 2004. For legal work, this matters when assessing whether stabilising conduct occurred within the regulatory window and whether the exemption was available at the time of the relevant transactions.
Section 2 (Definitions) is central because it tightly constrains the scope of the exemption. Two defined terms do the heavy lifting:
- “Notes” are defined as the guaranteed senior fixed rate notes issued by Sino-Forest Corporation in August 2004, with a principal amount of up to US$350 million. The notes are guaranteed by all the subsidiaries of Sino-Forest Corporation except those incorporated in the People’s Republic of China.
- “stabilising action” means an action taken in Singapore or elsewhere by Morgan Stanley & Co. Inc. (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.
From a compliance perspective, these definitions are deliberately narrow. The exemption is not available for stabilisation of other instruments, other issuers, or stabilisation by other dealers. It is also not limited to purchases already executed; it extends to offers or agreements to buy, which can be relevant for documenting intent and contractual arrangements.
Section 3 (Exemption) provides the operative relief. It states that sections 197 and 198 of the Act shall not apply to any stabilising action taken in respect of any of the Notes, within 30 days from the date of issue of the Notes, with respect to stabilising action taken by:
- (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.
Although the extract does not reproduce sections 197, 198, 274, or 275(2), the structure indicates that the SFA contains specific market conduct prohibitions (sections 197 and 198) and that the exemption is conditioned on the counterparty or participant falling within particular categories (section 274 persons) or being a sophisticated investor (section 275(2)). Practitioners should therefore treat section 3 as a conditional carve-out: stabilisation must (i) be in respect of the defined Notes, (ii) be taken by the defined stabiliser (via the definition of “stabilising action”), and (iii) occur within the 30-day period from issue, and (iv) involve the relevant categories of persons/investors.
In practical terms, the exemption is designed to permit stabilising purchases (and related offers/agreements) during the early trading period after issuance—when price discovery is most volatile—while reducing the risk that stabilisation is misconstrued as prohibited conduct under the SFA.
How Is This Legislation Structured?
The Regulations are structured in a simple, three-section format:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that precisely identify the Notes and the stabilising action covered.
- Section 3 contains the exemption from specified SFA provisions, including the key conditions (30-day period and the relevant categories of persons/investors).
There are no additional parts or schedules in the extract. The instrument is therefore best understood as a targeted exemption regulation rather than a comprehensive market conduct code.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action in relation to the defined “Notes” and are directed at stabilisation activities undertaken by the defined stabiliser: Morgan Stanley & Co. Inc. or its related corporations. The exemption is also conditioned on the stabilising action being taken with respect to transactions involving either (a) a person referred to in section 274 of the SFA or (b) a sophisticated investor as defined in section 275(2).
Accordingly, the practical audience includes: (i) the stabilising dealer and its compliance teams, (ii) legal counsel advising on whether stabilisation conduct is permissible, and (iii) transaction counterparties whose status may determine whether the exemption applies. Because the exemption is time-bound and instrument-specific, it is unlikely to be relevant to unrelated issuances or routine secondary market trading.
Why Is This Legislation Important?
This Regulations is important because it illustrates how Singapore’s market conduct regime balances two competing objectives: preventing manipulation and preserving orderly markets. Stabilisation is a recognised technique in certain offerings, but it can resemble prohibited conduct if not properly authorised. By exempting stabilising action from sections 197 and 198 of the SFA, MAS provides legal certainty for a particular issuance and stabiliser, reducing compliance risk and enabling market participants to carry out stabilisation in a controlled manner.
For practitioners, the key significance lies in the precision of the exemption. The Regulations do not offer a broad stabilisation licence. Instead, they require strict alignment with the defined Notes, the defined stabiliser, and the defined time window. This means that legal review should focus on factual and documentary alignment: confirming the exact instrument, verifying the issue date, tracking the 30-day period, and ensuring that the relevant parties fall within the categories contemplated by sections 274 and 275(2).
Enforcement risk remains even with an exemption. While the exemption removes the application of sections 197 and 198, it does not necessarily immunise conduct from other legal requirements (for example, general prohibitions, disclosure obligations, or other regulatory conditions that may apply to market conduct). Therefore, counsel should treat the exemption as a targeted relief from specified provisions, not as a blanket endorsement of all stabilisation-related behaviour.
Related Legislation
- Securities and Futures Act (Cap. 289) — including 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 as provided in the 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. 34) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.