Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 45) Regulations 2004
- Act Code: SFA2001-S700-2004
- Type: Subsidiary Legislation (sl)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting authority: Monetary Authority of Singapore (MAS)
- Commencement: 24 November 2004
- Legislative basis: Made under section 337(1) of the Securities and Futures Act
- Key provisions: Section 1 (Citation and commencement), Section 2 (Definitions), Section 3 (Exemption)
- Instrument number: SL 700/2004
- Notes covered: “7-year fixed rate notes due November 2011” issued by Mayne Group Limited (up to US$200 million)
- Stabilising party: 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. 45) Regulations 2004 is a targeted regulatory instrument that creates a narrow exemption from certain market conduct rules under the Securities and Futures Act (the “SFA”). In practical terms, it permits specified “stabilising action” in relation to a particular bond issuance—without triggering the prohibitions that would otherwise apply.
Stabilisation is a familiar concept in securities markets. When new debt securities are issued, there may be volatility in the secondary market immediately after launch. Market makers or underwriters may take limited steps to support or maintain the trading price, with the aim of reducing disorderly trading. However, stabilisation can also resemble conduct that market conduct laws seek to prevent—such as manipulation or misleading price formation. This Regulations resolves that tension by carving out an exemption, but only for a defined set of circumstances.
Scope-wise, the Regulations is not a general stabilisation regime for all securities. It is an instrument tied to a specific issuance: 7-year fixed rate notes due November 2011 issued by Mayne Group Limited (up to US$200 million). It also restricts the stabilising action to a specific stabilising entity (Morgan Stanley & Co. International Limited and its related corporations) and limits the time window for which the exemption operates.
What Are the Key Provisions?
Section 1 (Citation and commencement) is straightforward. It provides the short title and states that the Regulations came into operation on 24 November 2004. For practitioners, this matters because the exemption is time-sensitive: stabilising action must occur within the period specified in Section 3.
Section 2 (Definitions) defines two critical terms that determine the boundaries of the exemption: “Notes” and “stabilising action”. The “Notes” are expressly identified as the 7-year fixed rate notes due November 2011 issued by Mayne Group Limited for a principal amount of up to US$200 million. This specificity is important: stabilising action in relation to other instruments, other maturities, or different issuances would not fall within the exemption.
“Stabilising action” is also tightly defined. It means an action taken in Singapore or elsewhere by Morgan Stanley & Co. International Limited (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. The definition is notable for three reasons: (1) it covers actions both in Singapore and abroad; (2) it includes not only actual purchases but also offers or agreements to buy; and (3) it ties the purpose of the action to stabilisation/price maintenance.
Section 3 (Exemption) is the operative provision. 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, with two categories of counterparties/participants. Specifically, the exemption applies if the stabilising action is taken with:
- (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 provided does not reproduce Sections 197, 198, 274, or 275(2), the structure indicates that Sections 197 and 198 are the market conduct prohibitions that would otherwise constrain trading behaviour. The exemption therefore functions as a permission mechanism: stabilising trades conducted within the specified time window and with the specified categories of persons are carved out from those prohibitions.
From a compliance perspective, the two gating conditions in Section 3 are critical. First, the stabilising action must occur within 30 days from the date of issue. This means that stabilisation outside that window would not benefit from the exemption and could expose the stabilising party to enforcement risk under the general market conduct rules. Second, the stabilising action must be taken with a counterparty that falls within the defined categories—either a person under section 274 or a sophisticated investor under section 275(2). Practitioners should therefore ensure that trading counterparties are correctly classified and evidenced.
Finally, the Regulations are made by MAS on 17 November 2004, with an accompanying reference to internal instrument identifiers. While these administrative details are not usually the focus of legal analysis, they confirm the formal adoption of the exemption and the regulator’s intent to permit stabilisation for this particular transaction.
How Is This Legislation Structured?
This Regulations is a short, transaction-specific subsidiary instrument with a simple structure:
- Section 1: Citation and commencement (sets the effective date).
- Section 2: Definitions (pins down the “Notes” and “stabilising action”).
- Section 3: Exemption (the operative carve-out from Sections 197 and 198 of the SFA, subject to time and counterparty conditions).
Notably, there are no additional parts or complex schedules in the extract. The legislative design reflects a targeted exemption rather than a comprehensive stabilisation framework.
Who Does This Legislation Apply To?
The exemption is directed at the conduct of Morgan Stanley & Co. International Limited and its related corporations when they take stabilising action in relation to the specified Mayne Group Limited notes. While the Regulations does not expressly list every potential participant in the transaction (such as the issuer or other underwriters), the exemption is framed around actions taken by the defined stabilising party.
In addition, Section 3 restricts the exemption to stabilising actions taken with counterparties that fall within section 274 of the SFA or with sophisticated investors under section 275(2). Accordingly, even where stabilising action is otherwise within the 30-day period, the exemption will not apply if the stabilising trades are conducted with persons outside those categories. For practitioners, this means counterparty eligibility is not a peripheral issue—it is a core condition of the exemption.
Why Is This Legislation Important?
For legal practitioners, the significance of this Regulations lies in how it balances market integrity with practical market-making needs. Market conduct rules typically aim to prevent manipulation and misleading market signals. Yet stabilisation can be legitimate when conducted within strict boundaries. By exempting stabilising action from Sections 197 and 198, MAS provides legal certainty for a specific issuance and stabilisation strategy.
From an enforcement and risk-management standpoint, the Regulations reduces uncertainty for the stabilising entity during the critical post-issuance period. Without such an exemption, stabilising purchases (or offers/agreements to buy) could potentially be characterised as prohibited conduct under general market conduct provisions. The exemption therefore operates as a compliance shield, but only within the defined parameters.
Practically, the Regulations also highlights the importance of documenting compliance with the exemption conditions. A stabilising programme should be structured to ensure: (1) the instrument is exactly the defined “Notes”; (2) the stabilising party is the defined entity or its related corporations; (3) actions are taken within 30 days from the date of issue; and (4) counterparties are limited to those within section 274 or sophisticated investors under section 275(2). Failure on any of these points could mean the exemption does not apply, leaving the stabilising trades subject to the general prohibitions in Sections 197 and 198.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular, Sections 197, 198, 274, 275(2), and the exemption-making power in section 337(1)
- Futures Act (as referenced in the platform metadata; relevant for broader market conduct context)
- Stabilising Act (as referenced in the platform metadata; relevant for broader stabilisation concepts)
- Timeline (instrument versioning and effective-date context)
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. 45) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.