Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 6) Regulations 2005
- Act Code: SFA2001-S68-2005
- Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting authority: Monetary Authority of Singapore (MAS)
- Legal basis: Powers under section 337(1) of the Securities and Futures Act
- Commencement: 7 February 2005
- Key provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory focus: Exemption from market conduct restrictions for stabilising purchases/arrangements relating to specified notes
- Instrument specificity: Applies to a defined set of “Notes” issued by Chaoda Modern Agriculture (Holdings) Limited
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 6) Regulations 2005 is a targeted regulatory instrument. In plain language, it creates a narrow exemption from certain “market conduct” rules in the Securities and Futures Act (the “SFA”) that would otherwise restrict dealing activity. The exemption is designed to permit stabilising action in relation to a specific bond/notes issuance, without triggering the prohibitions that normally apply to trading and market manipulation conduct.
Stabilising action is a well-known market practice in capital markets. When new securities are issued, underwriters or market makers may take steps to support or stabilise the trading price for a limited period, typically to reduce volatility while the market absorbs the new issuance. However, stabilising activity can resemble prohibited conduct if it is not carefully bounded. This Regulations therefore balances two objectives: (1) allowing legitimate stabilisation to support orderly trading, and (2) preserving the integrity of the market by ensuring stabilisation is time-limited and confined to defined participants and instruments.
Although the Regulations are short, they are legally significant because they carve out an exemption from sections 197 and 198 of the SFA. Those sections generally relate to restrictions on certain dealings and conduct that could be characterised as market manipulation or improper trading. By providing an exemption, MAS authorises stabilising action—by specified persons—within a defined window after issuance, thereby enabling the issuer’s distribution strategy to proceed while remaining compliant with the SFA framework.
What Are the Key Provisions?
Section 1: Citation and commencement sets the formal identity of the Regulations and provides that they come into operation on 7 February 2005. For practitioners, this matters because the exemption’s availability depends on the timing of stabilising action relative to the Regulations’ commencement and the issuance timeline.
Section 2: Definitions is the heart of the instrument’s precision. It defines two key terms: “Notes” and “stabilising action”. The definition of “Notes” is highly specific. It refers to 5-year guaranteed fixed rate senior notes due February 2010 issued by Chaoda Modern Agriculture (Holdings) Limited for a principal amount of up to US$300 million. The notes are further described as being guaranteed by certain subsidiaries of the issuer that are not incorporated in the People’s Republic of China. This level of detail is typical of stabilisation exemptions: the exemption is not general; it is tied to a particular issuance and its legal characteristics.
The definition of “stabilising action” is equally specific. It means an action taken in Singapore or elsewhere by Merrill Lynch International or any of its related corporations. The action must involve buying, or offering or agreeing to buy, any of the Notes in order to stabilise or maintain the market price of the Notes in Singapore or elsewhere. This definition is important for compliance because it delineates both (a) the permitted actor (Merrill Lynch International and related corporations) and (b) the permitted conduct (buying or offering/agreeing to buy) and (c) the purpose (stabilisation/price maintenance). If a dealing falls outside these elements, the exemption may not apply.
Section 3: Exemption provides the operative relief. 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 of the Notes. The exemption is conditional on stabilising action being taken within that 30-day window and being carried out with respect to the defined Notes.
Section 3 also limits the exemption to stabilising action involving either:
- a person referred to in section 274 of the Act; or
- a “sophisticated investor” as defined in section 275(2) of the Act.
For a practitioner, this is a critical compliance gate. Even if the stabilising activity is performed by the defined stabilising actor (Merrill Lynch International or related corporations) and within the 30-day period, the exemption is still not universally available. It depends on the counterparty or relevant person category—i.e., whether the stabilising action is taken with a person within section 274 or with a sophisticated investor. This reflects the policy that stabilisation should be channelled through appropriate market participants and investor categories, reducing the risk of unfair dealing or manipulation.
Finally, the Regulations include the making statement by MAS (signed by KOH YONG GUAN, Managing Director of MAS) and the date of making (5 February 2005). While this is not a substantive rule, it is relevant for record-keeping and for confirming the instrument’s formal adoption.
How Is This Legislation Structured?
This Regulations is structured as a short subsidiary instrument with a conventional layout:
- Section 1 (Citation and commencement): identifies the Regulations and sets the commencement date.
- Section 2 (Definitions): defines “Notes” and “stabilising action” with high specificity.
- Section 3 (Exemption): provides the exemption from sections 197 and 198 of the SFA, subject to timing (30 days from issue), instrument scope (the defined Notes), and participant/investor scope (section 274 persons or sophisticated investors under section 275(2)).
There are no additional parts or complex schedules in the extract provided. The legal effect is therefore concentrated in the definitions and the exemption clause.
Who Does This Legislation Apply To?
In practical terms, the Regulations applies to parties involved in stabilising dealings in the specified Notes. The exemption is framed around “stabilising action” taken by Merrill Lynch International or its related corporations. Therefore, the primary compliance audience includes the stabilising dealer/underwriter group and any related entities that may execute stabilising trades.
However, the exemption is not solely about who trades; it is also about who the stabilising action is taken with (or in relation to). Section 3 restricts the exemption to stabilising action involving either a person referred to in section 274 of the SFA or a sophisticated investor under section 275(2). Accordingly, issuers, underwriters, and trading desks must consider not only the identity of the stabilising actor but also the relevant counterparty category and investor classification.
Why Is This Legislation Important?
This Regulations is important because stabilisation is a legitimate market practice that can be essential to the success of certain note issuances, particularly where liquidity and price discovery may be thin immediately after issuance. Without an exemption, stabilising activity could be at risk of falling within prohibited conduct under the SFA—potentially exposing market participants to regulatory action, enforcement risk, or the need to restructure issuance arrangements.
By carving out an exemption from sections 197 and 198 for a defined set of Notes, the Regulations provides legal certainty. It signals MAS’s acceptance that stabilising action—when properly bounded by time, instrument, actor, and investor category—can be consistent with market integrity objectives. For practitioners, this reduces uncertainty in underwriting and distribution documentation, trading mandates, and compliance controls.
From an enforcement and compliance perspective, the Regulations also illustrates how exemptions are typically drafted in Singapore’s market conduct regime: narrowly, with clear definitions and strict conditions. The 30-day limit is a particularly important operational constraint. Stabilising activity outside the window may not be covered, and therefore firms must implement robust trade surveillance and record-keeping to demonstrate compliance with the “within 30 days from the date of issue” requirement.
Additionally, the counterparty/investor limitation (section 274 persons or sophisticated investors) means that legal teams should coordinate with compliance and front-office stakeholders to confirm investor status and ensure that stabilising trades are executed within the permitted framework. Where sophisticated investor status is relevant, documentation and verification processes become crucial.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197, 198, 274, 275(2), and the regulation-making power in section 337(1)
- Futures Act (as referenced in the provided metadata context)
- Stabilising Act (as referenced in the provided metadata context)
- Legislation Timeline (for version control and current status as at 27 March 2026)
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. 6) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.