Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 40) Regulations 2004
- Act Code: SFA2001-S588-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Authorising Provision: Section 337(1) of the Securities and Futures Act
- Commencement: 24 September 2004
- Legislative Status: Current version as at 27 March 2026 (per provided extract)
- Legislation Number: SL 588/2004
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
- Enacting Formula (summary): Made by the Monetary Authority of Singapore (MAS) under powers in the Securities and Futures Act
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 40) Regulations 2004 is a targeted regulatory instrument. In plain terms, it creates a narrow exemption from certain “market conduct” rules in the Securities and Futures Act for a specific type of market activity—namely, stabilising purchases or offers—carried out in relation to a defined set of debt securities (the “Notes”).
Market conduct rules in the Securities and Futures Act generally aim to prevent manipulation and ensure fair dealing in securities markets. However, stabilisation is a recognised market practice in some issuance contexts: underwriters or financial institutions may buy (or offer to buy) securities shortly after issuance to support liquidity or reduce volatility. This legislation acknowledges that stabilisation, when properly bounded, can serve legitimate issuance-market functions without necessarily amounting to prohibited conduct.
Accordingly, these Regulations carve out a limited window and limited counterparties for stabilising action in respect of the Notes. The exemption is not general; it is tied to (i) the specific Notes described in the Regulations, (ii) stabilising action taken within 30 days from the date of issue, and (iii) stabilising action undertaken by persons within specified categories (persons referred to in section 274 of the Act or “sophisticated investors” as defined in section 275(2) of the Act).
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states that they come into operation on 24 September 2004. For practitioners, this matters when assessing whether stabilising activity occurred within the regulatory framework and whether any compliance analysis should reference the Regulations as in force at the relevant time.
Section 2 (Definitions) is crucial because the exemption is only as broad as the defined terms. The Regulations define two key concepts:
(a) “Notes” are specifically identified as the 7-year US dollar guaranteed senior notes due September 2011 issued by Panva Gas Holdings Limited for a principal amount of up to US$200 million. The Notes are guaranteed by a specified group of guarantors: China Pan River Group Limited, China Overlink Holdings Co., Limited, Sinolink LPG Investment Limited, Singkong Investments Limited, and Sinolink Power Investment Limited.
(b) “stabilising action” is defined as an action taken in Singapore or elsewhere by Merrill Lynch, Pierce, Fenner & Smith Incorporated (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 legal risk perspective, these definitions mean that stabilisation must be performed by the specified institution (Merrill Lynch or related corporations) and must relate to the specific Notes. If a different dealer stabilises, or if the security is not the defined Notes, the exemption would not apply.
Section 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the Securities and Futures 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 stabilising action 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 removes the application of the specified market conduct provisions (sections 197 and 198) for the limited stabilisation activity described. While the extract does not reproduce sections 197 and 198 themselves, the structure indicates that those sections likely contain prohibitions or restrictions relevant to market manipulation, improper trading, or dealings that could affect price formation. The exemption therefore functions as a “safe harbour” for stabilisation, but only within the defined parameters.
Time limit: The stabilising action must occur within 30 days from the date of issue. This is a hard boundary. Practitioners should ensure deal documentation, trading logs, and settlement records can demonstrate that any stabilisation trades fall within the permitted period.
Counterparty categories: The exemption is also conditional on the stabilising action being taken with a person in one of the two categories. This means that even if stabilisation is performed by the authorised stabiliser (Merrill Lynch or related corporations), the exemption may not cover transactions with other types of counterparties. Accordingly, compliance teams should map each stabilisation trade to the counterparty classification under section 274 or the “sophisticated investor” definition in section 275(2).
How Is This Legislation Structured?
This Regulations is short and consists of an enacting formula and three substantive provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions for “Notes” and “stabilising action”. These definitions are highly specific and effectively determine the scope of the exemption.
- Section 3 sets out the exemption from sections 197 and 198 of the Securities and Futures Act, subject to the time window (30 days), the stabiliser (Merrill Lynch or related corporations), the security (the defined Notes), and the counterparty categories (section 274 persons or sophisticated investors).
Because the instrument is narrowly drafted, the legal analysis typically turns on whether the facts fit the definitions and conditions rather than on interpreting complex multi-part regulatory frameworks.
Who Does This Legislation Apply To?
Although the exemption is framed as a carve-out from the Securities and Futures Act, it is practically relevant to parties involved in the issuance and post-issuance trading of the defined Notes. The Regulations specifically contemplate stabilising action taken by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its related corporations. Therefore, the primary regulated party in practice is the stabilising dealer (and its corporate group) conducting stabilisation trades.
In addition, the exemption is conditional on the counterparty being within the categories referenced by the Act: persons referred to in section 274 or “sophisticated investors” under section 275(2). This means that issuers, underwriters, and trading desks must consider not only who is trading but also who the trades are with. If stabilisation involves counterparties outside those categories, the exemption may not protect the conduct from the underlying prohibitions in sections 197 and 198.
Why Is This Legislation Important?
This Regulations is important because it demonstrates how Singapore’s market conduct regime balances two competing objectives: (i) preventing unfair or manipulative market practices, and (ii) allowing legitimate stabilisation practices in the context of securities issuance. By granting a targeted exemption, MAS enables stabilisation that may support orderly trading while still maintaining regulatory control through strict conditions.
For practitioners, the key value lies in its precision. The exemption is not a broad permission to stabilise any security; it is a bespoke instrument tied to a particular bond issue and a particular stabiliser. This kind of drafting is common where regulators want to permit a specific transaction structure without opening a general loophole.
From an enforcement and compliance standpoint, the Regulations also highlights the importance of documenting the basis for exemption. A lawyer advising on stabilisation should typically ensure that: (1) the security traded is exactly the “Notes” described; (2) the stabilising activity is undertaken by Merrill Lynch or related corporations; (3) trades occur within the 30-day window; and (4) counterparties are within the relevant statutory categories. Failure on any of these elements could expose trading activity to the underlying prohibitions in sections 197 and 198 of the Securities and Futures Act.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197, 198, 274, 275(2), and the exemption-making power in section 337(1).
- Futures Act (as referenced in the provided metadata context)
- Stabilising Act (as referenced in the provided metadata context)
- Timeline (legislation versioning reference tool)
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. 40) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.