Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 50) Regulations 2004
- Act Code: SFA2001-S755-2004
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (notably section 337(1))
- Commencement: 17 December 2004
- Legislative Status: Current version as at 27 March 2026 (per the provided extract)
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory Focus: Exemption from market conduct prohibitions for stabilising actions relating to specified notes
- Specified Instruments: “Notes” defined as 10-year guaranteed fixed rate notes due December 2014 issued by PCI Capital Limited (up to US$125 million) and guaranteed by Pacific Century Insurance Company Limited
- Specified Stabiliser: Stabilising action taken by Lehman Brothers International (Europe) (or related corporations)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 50) Regulations 2004 (“Stabilising Action Exemption Regulations”) is a targeted piece of subsidiary legislation. In plain terms, it creates a narrow legal “safe harbour” that allows certain market participants to take stabilising steps in relation to a particular set of debt securities—without being caught by specific market conduct prohibitions in the Securities and Futures Act (SFA).
Stabilisation is a practice used in securities markets, particularly around issuance and trading of new instruments. It typically involves buying (or offering to buy) the relevant securities in order to support or maintain their market price. While stabilisation can be legitimate and beneficial—helping reduce volatility and supporting orderly trading—it can also resemble conduct that regulators treat as manipulative if not properly constrained.
This legislation therefore does not broadly legalise stabilisation. Instead, it carves out an exemption for stabilising action in respect of a defined “Notes” issue, taken by a defined stabiliser (Lehman Brothers International (Europe) and related corporations), within a defined time window (30 days from the date of issue), and only where the stabilising actor falls within specified categories of persons (including certain persons under the SFA, or sophisticated investors).
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 17 December 2004. For practitioners, this matters when assessing whether particular stabilising activity occurred after the exemption was effective.
Section 2 (Definitions) is critical because the exemption is highly dependent on the precise meaning of the defined terms. Two definitions are provided:
- “Notes” are defined with specificity: they are the 10-year guaranteed fixed rate notes due December 2014 issued by PCI Capital Limited for up to US$125 million, and guaranteed by Pacific Century Insurance Company Limited. This definition ties the exemption to a particular issuance, not to any generic class of notes.
- “stabilising action” is defined as an action taken in Singapore or elsewhere by Lehman Brothers International (Europe) (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. The definition is both actor-specific (Lehman and related corporations) and purpose-specific (stabilising/maintaining market price).
Section 3 (Exemption) is the operative provision. It states that Sections 197 and 198 of the Act shall not apply to stabilising action taken in respect of any of the Notes, within 30 days from the date of issue, with stabilising action 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.
In practical terms, Section 3 does two things. First, it identifies the market conduct prohibitions from which the stabilising action is exempted—namely, the prohibitions in SFA sections 197 and 198. Second, it imposes conditions that must be satisfied for the exemption to apply: (i) timing (within 30 days from issue), (ii) instrument (the defined Notes), (iii) actor and conduct (as defined stabilising action), and (iv) counterparty/transaction context (dealing with specified categories of persons or sophisticated investors).
Although the extract does not reproduce the text of SFA sections 197 and 198, the structure indicates that those sections likely regulate or prohibit certain forms of market conduct that could be characterised as improper dealing, misleading conduct, or related trading restrictions. The exemption therefore functions as a legislative permission that prevents stabilising activity—when conducted within the defined boundaries—from being treated as a breach of those prohibitions.
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 that narrow the scope of the exemption to a specific notes issue and a specific stabilising actor and conduct.
- Section 3 contains the exemption from SFA sections 197 and 198, subject to timing and dealing-with conditions.
For practitioners, the brevity is a feature: the Regulations operate as a precise “switch” that turns off certain SFA prohibitions for a narrowly defined stabilisation scenario.
Who Does This Legislation Apply To?
The exemption is not directed at the general investing public. It applies to stabilising action as defined—meaning actions taken by Lehman Brothers International (Europe) (or its related corporations). Therefore, the primary regulated party is the stabilising entity (and its corporate group), rather than issuers, retail investors, or unrelated market participants.
However, the exemption also depends on the counterparty category for the stabilising transactions. Section 3 requires that the stabilising action be taken “with” either (a) a person referred to in section 274 of the SFA, or (b) a sophisticated investor under section 275(2). This means that even where the stabiliser and the Notes are correct, the exemption may fail if the stabilising trades are executed with persons outside those categories.
Why Is This Legislation Important?
This Regulations matters because it addresses a recurring tension in securities regulation: stabilisation can be legitimate, but it can also be misused or misunderstood as market manipulation. By granting a conditional exemption, the SFA framework can permit stabilisation while maintaining regulatory control over when and how stabilising conduct occurs.
From a compliance perspective, the key practical impact is that market participants involved in the issuance and trading of the defined Notes can structure stabilisation activities to fit within the exemption. If the conditions are met—correct Notes, correct stabiliser, correct time window, and correct counterparty categories—then the stabilising trades should not trigger liability under SFA sections 197 and 198.
Conversely, the Regulations also creates a clear risk boundary. If stabilising action occurs outside the 30-day period, relates to instruments outside the defined “Notes,” is taken by an entity not covered by the definition, or is conducted with counterparties not within the specified categories, the exemption would not apply. In that scenario, the stabilising conduct could be assessed under the underlying SFA prohibitions (sections 197 and 198), exposing the stabiliser and potentially other involved parties to enforcement risk.
For lawyers advising on market conduct compliance, this means the work is not merely interpretive; it is evidential and transactional. Counsel should ensure that documentation, trade records, and counterparty classifications align with the statutory definitions and conditions. The exemption’s narrowness makes contemporaneous compliance records particularly important.
Related Legislation
- Securities and Futures Act (SFA) (Cap. 289) — in particular:
- Section 337(1) (authorising the making of these Regulations)
- Sections 197 and 198 (market conduct provisions from which the exemption applies)
- Section 274 (category of persons relevant to the exemption condition)
- Section 275(2) (definition of “sophisticated investor” for the exemption)
- Futures Act (referenced in the provided metadata as related legislation)
- Stabilising Act (referenced in the provided metadata as related legislation)
- Legislation Timeline (referenced in the provided metadata as a tool to confirm the correct version)
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. 50) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.