Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 41) Regulations 2004
- Act Code: SFA2001-S670-2004
- Legislation Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (notably section 337(1))
- Commencement: 1 November 2004
- Legislative Status: Current version as at 27 March 2026 (per the provided extract)
- Regulation Number: SL 670/2004
- Key Provisions: Regulation 1 (Citation and commencement); Regulation 2 (Definitions); Regulation 3 (Exemption)
- Relevant SFA Provisions Referenced: Sections 197, 198, 274, 275(2), and 337(1)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 41) Regulations 2004 is a targeted set of exemptions made under the Securities and Futures Act (SFA). In plain language, it allows certain market participants—specifically UBS Limited and its related corporations—to take “stabilising action” in relation to specified debt securities (the “Upper Tier II Notes” and “Lower Tier II Notes” issued by Chohung Bank) without being caught by particular market conduct rules in the SFA.
Market stabilisation is a practice used around the issuance of securities to help maintain orderly trading and reduce extreme price volatility that can occur immediately after a new issue. However, stabilisation can overlap with conduct that regulators would otherwise treat as potentially manipulative or unfair. This legislation resolves that tension by carving out a narrow exemption: stabilising activity is permitted, but only if it meets the defined conditions and timing requirements.
Importantly, the exemption is not general. It is tied to particular notes (with defined maturity, issuer, and principal amount) and to a defined stabilising actor (UBS Limited and related corporations). It also applies only within a limited window after issuance—30 days from the date of issue of the relevant notes. This makes the Regulations highly practical for deal counsel and compliance teams involved in the issuance and trading of these specific instruments.
What Are the Key Provisions?
Regulation 1 (Citation and commencement) provides the formal citation and sets the commencement date. The Regulations come into operation on 1 November 2004. For practitioners, this matters for determining whether the exemption could apply to stabilising actions taken on or after that date.
Regulation 2 (Definitions) is the backbone of the exemption because it precisely defines (i) the notes covered and (ii) what counts as “stabilising action.” The Regulations define:
- “Upper Tier II Notes”: 10-year lower tier II notes due November 2014 issued by Chohung Bank for a principal amount of up to US$200 million.
- “Lower Tier II Notes”: 10-year lower tier II notes due November 2014 issued by Chohung Bank for a principal amount of up to US$200 million.
- “stabilising action”: an action taken in Singapore or elsewhere by UBS Limited (or any of its related corporations) to buy, or to offer or agree to buy, any of the Upper Tier II Notes or Lower Tier II Notes, respectively, in order to stabilise or maintain the market price of those notes in Singapore or elsewhere.
From a compliance perspective, the definition is restrictive in three ways: (1) it limits the actor to UBS Limited and related corporations; (2) it limits the instruments to the defined notes; and (3) it limits the conduct to buying (or offering/agreement to buy) for stabilisation purposes.
Regulation 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of the specified Upper Tier II Notes or Lower Tier II Notes, within 30 days from the date of issue of the relevant notes, provided the stabilising action is taken with a person falling into one of two categories:
- (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.
Practically, this means the exemption is conditional not only on timing and instrument/actor, but also on counterparty type. Even if UBS engages in stabilising purchases, the exemption would not be available if the stabilising trades were conducted with counterparties outside the categories in section 274 or the “sophisticated investor” definition in section 275(2). For deal teams, this is a critical structuring and execution point: trade documentation, account opening, and counterparty classification must align with the statutory categories.
Another key feature is the 30-day limitation. The exemption is time-bound, reflecting the regulatory view that stabilisation is most justifiable immediately after issuance. After the 30-day period, stabilising conduct would revert to the default application of sections 197 and 198 (and any other relevant market conduct provisions), unless another exemption or safe harbour applies.
How Is This Legislation Structured?
The Regulations are structured as a short instrument with three main regulations:
- Regulation 1 sets the citation and commencement.
- Regulation 2 provides definitions that determine the scope of the exemption (notes covered and what constitutes stabilising action).
- Regulation 3 provides the exemption itself, specifying which SFA provisions are disapplied, the time window, the notes, the stabilising actor, and the permitted counterparty categories.
Because the instrument is concise, practitioners should read it alongside the referenced SFA provisions (sections 197, 198, 274, 275(2), and 337(1)) to understand the baseline obligations from which the exemption operates.
Who Does This Legislation Apply To?
In terms of direct applicability, the exemption is designed to benefit UBS Limited and its related corporations when they take stabilising action in relation to the defined Chohung Bank Upper Tier II Notes and Lower Tier II Notes. The Regulations do not create a general right for any market participant to stabilise; rather, they disapply specified SFA provisions only for stabilising actions that fit within the defined “stabilising action” concept.
Additionally, the exemption applies only when stabilising trades are conducted with a person referred to in section 274 of the SFA or with a sophisticated investor under section 275(2). Therefore, the exemption’s practical reach depends on both (i) the identity of the stabilising party and (ii) the classification of the counterparty. Compliance teams should treat counterparty eligibility as a gating requirement.
Why Is This Legislation Important?
This Regulations is important because it demonstrates how Singapore’s market conduct framework balances two competing objectives: (1) preventing manipulative or unfair trading practices, and (2) allowing legitimate market-making and stabilisation activities that support orderly markets during security issuance. By disapplying sections 197 and 198 for a narrowly defined stabilisation scenario, the Regulations provides legal certainty to participants involved in the issuance process.
For practitioners, the most significant practical impacts are:
- Deal execution certainty: If stabilising activity is contemplated, counsel can assess whether the exemption applies based on the defined notes, the stabilising actor, the 30-day window, and the counterparty categories.
- Compliance design: Trading controls must ensure that stabilising purchases (or offers/agreements to buy) are executed within the permitted period and with eligible counterparties.
- Risk management: If stabilising activity falls outside the exemption—e.g., after 30 days, involving different instruments, involving a different actor, or trading with ineligible counterparties—then the disapplied SFA provisions would likely apply, exposing the participant to regulatory and enforcement risk.
Finally, the Regulations’ specificity underscores a broader regulatory approach: exemptions are typically narrow, instrument-specific, and time-limited. This is a useful precedent for how to interpret other market conduct exemptions—namely, that practitioners should not assume a general stabilisation permission, but instead should verify the exact conditions and cross-referenced definitions.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular sections 197, 198, 274, 275(2), and 337(1)
- Futures Act (as referenced in the provided metadata context)
- Stabilising Act (as referenced in the provided metadata context)
- Legislation Timeline (for version verification and amendment history)
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. 41) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.