Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 6) Regulations 2006
- Act Code: SFA2001-S70-2006
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA) (Cap. 289), specifically section 337(1)
- Legislative Instrument No.: SL 70/2006
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 6) Regulations 2006
- Commencement: 6 February 2006
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Enacting Date: 27 January 2006
- Relevant SFA Provisions Referenced: Sections 197 and 198 (market conduct restrictions); section 239(1) (definition of “securities”); section 275(2) (definition of “relevant person”); section 337(1) (power to make regulations)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 6) Regulations 2006 (“Stabilising Action (Notes) Regulations”) is a targeted regulatory instrument. In essence, it creates a narrow exemption from certain market conduct prohibitions in the Securities and Futures Act (SFA) for stabilising activities carried out in relation to a specific set of debt securities—“Notes” issued in February 2006 by Glencore Finance (Europe) S.A.
Stabilising action is a common feature of securities issuance. During and shortly after a new issue, market makers or arrangers may buy (or offer to buy) securities to support liquidity and reduce volatility. However, market conduct rules often prohibit manipulative or misleading trading practices. This legislation reconciles those competing policy goals by allowing stabilisation in defined circumstances, while limiting the exemption to specified persons, a defined product, and a defined time window.
Practically, the Regulations operate as a “safe harbour” for stabilising trades in the Notes, provided the trades fall within the statutory definition and meet the conditions set out in the exemption. The exemption is not general: it is tied to the particular Notes described in the Regulations and to stabilising action taken within 30 days from the date of issue.
What Are the Key Provisions?
Section 1 (Citation and commencement) sets the legal identity and timing. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 6) Regulations 2006” and came into operation on 6 February 2006. For practitioners, commencement matters when assessing whether a stabilising trade occurred within the legal framework of the exemption.
Section 2 (Definitions) is the backbone of the Regulations because it defines the scope of what counts as the relevant securities and the relevant conduct. The definition of “Notes” is highly specific: it refers to “guaranteed fixed rate senior callable perpetual notes” issued in February 2006 by Glencore Finance (Europe) S.A. for a principal amount of up to US$750 million. The Notes are issued under a named Euro Medium Term Note Programme and are guaranteed by Glencore International AG and Glencore AG. This specificity is crucial: stabilising trades in other instruments, even if similar, would not automatically qualify.
Section 2 also defines “stabilising action” as an action taken in Singapore or elsewhere by Citigroup Global Markets Limited and HSBC Bank plc (or their 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. This definition does two things. First, it identifies the permitted actors (Citigroup and HSBC and their related corporations). Second, it links the purpose of the trades to stabilisation/price maintenance, which is often relevant in enforcement analysis—i.e., the trades must be consistent with stabilisation rather than other commercial objectives.
Finally, Section 2 incorporates existing SFA concepts by defining “securities” by reference to section 239(1) of the Act, and by defining “relevant person” by reference to section 275(2) of the Act (used later in the exemption). This cross-referencing ensures that the exemption aligns with the broader SFA framework.
Section 3 (Exemption) is the operative provision. It provides that Sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of the Notes, within 30 days from the date of issue, provided the stabilising action is taken with one of the following categories of counterparties:
- (a) an institutional investor;
- (b) a relevant person (as defined in section 275(2) of the SFA); or
- (c) a person who acquires the Notes as principal, but only if the consideration for the acquisition is not less than $200,000 (or its equivalent in a foreign currency) for each transaction, whether paid in cash or by exchange of securities or other assets.
From a practitioner’s perspective, the exemption has three cumulative “gates”:
- Product gate: the trades must relate to the defined “Notes”.
- Conduct gate: the trades must be “stabilising action” as defined (by the specified institutions and for stabilisation/price maintenance).
- Time and counterparty gates: the stabilising action must occur within 30 days from the date of issue, and the counterparty must fall within one of the three categories, including the $200,000 minimum consideration threshold for principal acquisitions.
The exemption’s design reflects a policy compromise: stabilisation is permitted, but only where the market is likely to be dominated by sophisticated participants (institutional investors and relevant persons) or where the transaction size is sufficiently large to reduce the risk of retail-style manipulation or thin-market distortions.
How Is This Legislation Structured?
The Regulations are structured as a short instrument with a conventional layout:
- Section 1 provides the citation and commencement provisions.
- Section 2 sets out definitions, including the precise description of the Notes and the definition of “stabilising action”.
- Section 3 contains the exemption from specified SFA market conduct provisions (sections 197 and 198), subject to time and counterparty conditions.
There are no additional parts or schedules in the extract provided, and the legislative technique is to use definitions and a single exemption clause to create a narrow safe harbour.
Who Does This Legislation Apply To?
Although the exemption is framed as an exemption from the SFA’s market conduct provisions, its practical application is directed at the parties who may conduct stabilising trades in the Notes. The definition of “stabilising action” limits the permitted conduct to actions taken by Citigroup Global Markets Limited and HSBC Bank plc (and their related corporations). Accordingly, the exemption is most relevant to those entities and their dealing desks, compliance teams, and transaction documentation processes.
However, the exemption also depends on the counterparty category. Therefore, the Regulations indirectly affect other market participants—such as institutional investors, “relevant persons”, and principal acquirers—because the exemption will only apply to stabilising action when the trades are executed with counterparties meeting the statutory criteria (including the $200,000 minimum consideration threshold for principal acquisitions).
Why Is This Legislation Important?
This legislation is important because it clarifies when stabilising trades—often scrutinised under market manipulation and market conduct rules—are legally permissible. Without an exemption, stabilising purchases or offers to buy could be argued to fall within prohibitions in the SFA, depending on how sections 197 and 198 are interpreted and enforced. By carving out stabilising action for the defined Notes within a defined period, the Regulations reduce legal uncertainty for arrangers and market makers.
For practitioners, the key value lies in the precision of the safe harbour. The Regulations do not permit stabilisation in general; they permit stabilisation in a particular instrument issued in February 2006, by specified institutions, within a 30-day window, and only with specified counterparty types and transaction size thresholds. This means compliance teams must implement controls to verify: (i) the instrument is the correct “Notes”; (ii) the trading activity is within the defined stabilising purpose; (iii) the trades occur within the relevant timeframe; and (iv) counterparties and transaction consideration satisfy the statutory conditions.
From an enforcement perspective, the exemption also provides a structured defence. If regulators allege market conduct breaches, the existence of a statutory exemption (if conditions are met) can be decisive. Conversely, if any condition is not met—such as trading outside the 30-day period, dealing with an ineligible counterparty, or trading a different instrument—the exemption would not apply, and the underlying SFA prohibitions would remain relevant.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly sections 197 and 198 (market conduct provisions), section 239(1) (“securities”), section 275(2) (“relevant person”), and section 337(1) (regulation-making power).
- Futures Act — referenced in the metadata as part of the broader legislative ecosystem (though not directly operative in the extract).
- Stabilising Act — referenced in the metadata as part of the stabilisation framework (though the operative instrument here is the 2006 Regulations).
- Legislation Timeline / MAS legislation timeline — relevant for confirming the correct version as at the relevant date.
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 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.