Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 5) Regulations 2005
- Act Code: SFA2001-S63-2005
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting authority: Monetary Authority of Singapore (MAS)
- Commencement: 1 February 2005
- Legislative basis: Made under section 337(1) of the Securities and Futures Act
- Key provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory focus: Exemption from market conduct provisions for stabilising transactions in specified notes
- Specified instrument: “Notes” = 7-year fixed rate notes due February 2012 issued by hanarotelecom incorporated (up to US$750 million)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 5) Regulations 2005 (“Stabilising Action (Notes) Regulations”) creates a narrow, instrument-specific exemption from certain market conduct rules under the Securities and Futures Act (the “SFA”). In practical terms, it allows a stabilising party to conduct limited buying and related activities in the secondary market for a particular bond issue, without those activities being treated as contraventions of the SFA’s general prohibitions.
Stabilisation is a common market practice in bond issuance. When new debt securities are launched, liquidity and price discovery can be volatile. Under stabilisation arrangements, an intermediary may buy (or offer to buy) the securities to help maintain orderly trading conditions and reduce extreme price movements. However, market conduct regimes often restrict such conduct to prevent manipulation or unfair market practices. This Regulations resolves that tension by carving out an exemption—provided strict conditions are met.
Importantly, the exemption is not general. It is tied to (i) a defined set of “Notes” (the hanarotelecom incorporated 7-year fixed rate notes due February 2012), (ii) a defined “stabilising action” (conduct by UBS Limited or its related corporations), and (iii) a defined time window (within 30 days from the date of issue). It also limits the exemption to stabilising transactions involving certain categories of counterparties: persons referenced in section 274 of the SFA or sophisticated investors as defined in section 275(2) of the SFA.
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 1 February 2005. For practitioners, this matters mainly for determining the regulatory framework applicable to stabilising activities undertaken around the issuance period.
Section 2 (Definitions) is the core interpretive gateway. It defines two terms that control the scope of the exemption:
(a) “Notes” are defined with precision: they are the 7-year fixed rate notes due February 2012 issued by hanarotelecom incorporated for a principal amount of up to US$750 million. This definition is critical because it prevents the exemption from being used for other bond issues, even if they are similar in structure or issuer.
(b) “stabilising action” is defined as 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 Notes in order to stabilise or maintain the market price of the Notes in Singapore or elsewhere. The inclusion of “offer or agree to buy” is legally significant: it captures not only actual purchases but also pre-transaction commitments that may be relevant to market conduct analysis.
Section 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the SFA shall not apply to any stabilising action taken in respect of any of the Notes, within 30 days from the date of issue, 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) of the SFA.
While the extract does not reproduce sections 197 and 198, the legal effect is clear: the Regulations removes the applicability of those SFA market conduct provisions to the specified stabilising conduct. For a practitioner, the key work is to map what sections 197 and 198 prohibit (or regulate) and then confirm that the stabilising activities fall squarely within the exemption’s defined boundaries.
Time limitation (30 days from issue) is a central compliance constraint. Stabilising action outside the 30-day window would not benefit from the exemption, meaning the general SFA provisions could apply. Practically, counsel should ensure that internal trading controls, documentation, and operational processes can evidence the timing of stabilising trades and any related offers or agreements.
Counterparty limitation is equally important. The exemption is limited to stabilising actions “with” a person in section 274 or a sophisticated investor. This implies that stabilising trades must be structured and executed so that the relevant counterparties meet the statutory categories. In practice, this requires careful investor classification and recordkeeping—particularly where trades are executed through intermediaries or where the identity of the ultimate counterparty may be obscured by execution venues or arrangements.
Geographical element (“in Singapore or elsewhere”) broadens the compliance analysis. Even if stabilising action occurs outside Singapore, the exemption can still apply, provided the action is by UBS Limited (or related corporations) and is in respect of the defined Notes and within the time and counterparty limits. Conversely, stabilising activity by other entities or in respect of other instruments would not be covered.
How Is This Legislation Structured?
The Regulations are structured as a short, targeted instrument with three sections:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that determine the scope of the exemption—specifically, what counts as the relevant “Notes” and what counts as “stabilising action”.
- Section 3 contains the exemption, specifying which SFA provisions are disapplied, the time window, and the permitted counterparty categories.
Notably, the Regulations do not create a licensing regime or a procedural application process. Instead, it operates as a direct statutory carve-out. This means that compliance is largely a matter of ensuring the factual matrix fits the definitions and conditions.
Who Does This Legislation Apply To?
By its terms, the exemption is relevant to UBS Limited and its related corporations when they take stabilising action in respect of the defined Notes. The Regulations does not purport to regulate all market participants generally; rather, it disapplies specified SFA provisions for a particular stabilisation scenario.
However, the exemption’s practical effect extends to the counterparties with whom stabilising action is undertaken. The stabilising action must be taken “with” either a person referenced in section 274 of the SFA or a sophisticated investor under section 275(2). Accordingly, issuers, arrangers, and trading desks should ensure that counterparties are properly identified and that investor status can be substantiated.
Why Is This Legislation Important?
This Regulations is important because it provides legal certainty for a specific type of market practice—bond stabilisation—while preserving the integrity of the broader market conduct framework. Without such an exemption, stabilising purchases or related commitments could be scrutinised under general prohibitions on market manipulation or improper trading conduct (as reflected in sections 197 and 198 of the SFA). The exemption therefore supports orderly capital markets by allowing controlled stabilisation in a defined context.
For practitioners, the value lies in the precision of the carve-out. The Regulations is not a blanket permission. It is a narrowly tailored disapplication that turns on: (i) the exact bond issue, (ii) the exact stabilising actor (UBS Limited and related corporations), (iii) the exact conduct (buying or offering/agreement to buy to stabilise or maintain price), (iv) the exact time window (30 days from issue), and (v) the exact counterparty categories (section 274 persons or sophisticated investors). This precision is a compliance roadmap: if any element is missing, the exemption may not apply.
From an enforcement and litigation perspective, such exemptions often become focal points in disputes about whether conduct was lawful. MAS and market participants will likely examine documentary evidence: trading logs, stabilisation notices (if any), investor classification records, and evidence of the stabilisation purpose. Counsel should also consider whether other regulatory regimes (for example, disclosure obligations, prospectus requirements, or other market conduct rules not disapplied) could still apply even where sections 197 and 198 are excluded.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular 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 for version control)
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. 5) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.