Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 42) Regulations 2004
- Act Code: SFA2001-S677-2004
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Commencement: 4 November 2004
- Enacting Date: Made on 27 October 2004
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
- Regulatory Focus: Exemption from market conduct restrictions for stabilising transactions in specified notes
- Relevant Act Provisions (as referenced): Sections 197, 198, 274, 275(2) of the Securities and Futures Act
- Instrument / Notes Covered: 10-year guaranteed fixed rate senior notes due November 2014 issued by SPI Electricity & Gas Australia Holdings Pty Ltd (up to US$400 million) under a US$1.5 billion Medium Term Note Programme
- Stabilising Party (as defined): Morgan Stanley & Co. International Limited and related corporations
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 42) Regulations 2004 is a targeted regulatory instrument. In essence, it creates a narrow exemption from certain market conduct provisions in the Securities and Futures Act (the “SFA”) for stabilising activity carried out in relation to a specific issuance of debt securities (the “Notes”).
In plain language, when new securities are issued, market participants sometimes undertake “stabilising” transactions—typically buying (or offering to buy) securities—to help maintain orderly trading and reduce excessive price volatility during the initial trading period. However, stabilisation can resemble prohibited conduct if it is not clearly authorised and constrained. This Regulations therefore permits stabilising action, but only for a defined set of Notes, by defined persons, and only within a defined time window.
The Regulations operate as an exception to the general prohibition framework in the SFA. Rather than changing the underlying market conduct rules, it carves out a specific exemption so that stabilising activity can occur without triggering the prohibitions in sections 197 and 198 of the SFA—provided the statutory conditions are satisfied.
What Are the Key Provisions?
Section 1 (Citation and commencement) establishes the short title and the date the Regulations came into force. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 42) Regulations 2004” and they commenced on 4 November 2004. For practitioners, this matters because the exemption is only available for stabilising action taken after the Regulations are in operation (and, in any event, within the time limits in section 3).
Section 2 (Definitions) is central to the narrow scope of the exemption. It defines two key terms:
- “Notes”: the Regulations precisely identify the securities covered—10-year guaranteed fixed rate senior notes due November 2014 issued by SPI Electricity & Gas Australia Holdings Pty Ltd for a principal amount of up to US$400 million, under its US$1,500,000,000 Medium Term Note Programme.
- “stabilising action”: stabilising action is defined as an action taken in Singapore or elsewhere by Morgan Stanley & Co. International Limited (or any of its related corporations) to buy, or 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.
This drafting approach is typical of exemptions in market conduct regimes: the exemption is not generic. It is tied to a particular issuance and a particular stabilising actor. As a result, if a different issuer, different security, or different stabilising entity is involved, the exemption may not apply.
Section 3 (Exemption) provides the operative relief. It states that sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of any of the Notes, within 30 days from the date of issue of the Notes, with stabilising action carried out with one of the following categories of counterparties:
- Section 3(a): a person referred to in section 274 of the SFA; or
- Section 3(b): a sophisticated investor as defined in section 275(2) of the SFA.
For legal practitioners, the practical effect is that stabilising transactions meeting the conditions are carved out from the prohibitions in sections 197 and 198. The exemption is time-bound (30 days from issue) and counterparty-bound (limited to persons in section 274 or sophisticated investors). The Regulations also implicitly preserve the broader market conduct framework: only the specified prohibitions are excluded, and only for stabilising action that fits the defined scope.
Although the extract does not reproduce the text of sections 197 and 198, the structure indicates that those provisions likely address improper market conduct in connection with securities transactions (commonly including restrictions on manipulative or misleading trading practices). The exemption therefore functions as a “safe harbour” for stabilisation, but only where the stabilisation is legitimate in purpose (price stabilisation) and constrained by the Regulations’ conditions.
How Is This Legislation Structured?
The Regulations are short and structured around three provisions:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions for “Notes” and “stabilising action”, which effectively determine the boundaries of the exemption.
- Section 3 contains the exemption itself, specifying (i) which SFA sections are disapplied, (ii) the time period (30 days from issue), and (iii) the permitted counterparty categories (section 274 persons or sophisticated investors).
From a practitioner’s perspective, the Regulations are best read as a permissions instrument: the definitions in section 2 define what can be stabilised and who can stabilise; section 3 then defines when and with whom the stabilising action can occur without breaching the disapplied SFA provisions.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action in relation to the specified Notes. The exemption is available only for stabilising action carried out by Morgan Stanley & Co. International Limited or its related corporations, as that is how “stabilising action” is defined. This means the exemption is not open to all market participants; it is actor-specific.
In addition, the exemption is conditional on the stabilising transactions being undertaken within 30 days from the date of issue and being conducted with counterparties falling within section 274 of the SFA or with sophisticated investors under section 275(2). Accordingly, even where the stabilising actor and the Notes match, the exemption may not apply if the stabilising trades are executed with other categories of persons or outside the time window.
Why Is This Legislation Important?
This Regulations is important because it illustrates how Singapore’s market conduct framework balances two competing policy goals: (1) preventing manipulative or improper trading practices, and (2) allowing legitimate market-making and stabilisation practices that support orderly price formation during new issuances.
For issuers, arrangers, and trading desks involved in debt capital markets transactions, the exemption provides legal certainty for a common market practice—stabilisation—by explicitly disapplying specified SFA provisions. Without such an exemption, stabilising purchases or offers to buy could create regulatory risk, potentially exposing firms to enforcement action or requiring complex structuring to avoid triggering prohibitions.
From an enforcement and compliance standpoint, the Regulations’ narrow drafting is also significant. The exemption is limited by: (i) the exact identity of the Notes; (ii) the exact stabilising actor; (iii) the exact time period (30 days from issue); and (iv) the exact counterparty categories. This means compliance teams should focus on documentation and controls addressing each condition—particularly trade date relative to issue date, counterparty classification (section 274 persons or sophisticated investors), and whether the stabilising activity falls within the defined purpose and conduct (buying or offering/agreement to buy to stabilise or maintain market price).
Practically, lawyers advising on such transactions should treat the Regulations as a checklist-based safe harbour. If any element is missing—wrong security, wrong stabilising entity, trades outside the 30-day period, or trades with non-qualifying counterparties—the exemption may not apply, and the underlying SFA market conduct prohibitions could become relevant.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197, 198, 274, and 275(2)
- Futures Act (as referenced in the platform metadata)
- Stabilising Act (as referenced in the platform metadata)
- Legislation Timeline (for version control 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. 42) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.