Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 7) Regulations 2006
- Act Code: SFA2001-S103-2006
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Commencement: 23 February 2006
- Regulation Number: SL 103/2006
- Status: Current version as at 27 March 2026
- Key Provisions: Regulation 1 (Citation and commencement); Regulation 2 (Definitions); Regulation 3 (Exemption)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 7) Regulations 2006 (“Stabilising Action Exemption Regulations”) is a targeted set of rules made under the Securities and Futures Act (the “SFA”). In plain language, it creates a limited exemption from certain market conduct provisions when stabilising activity is carried out in relation to a specific issue of notes.
Stabilisation is a practice commonly seen in capital markets transactions, where an underwriter or related entity buys (or offers to buy) securities shortly after issuance to help maintain orderly trading and reduce excessive price volatility. However, stabilisation can overlap with statutory prohibitions designed to prevent market manipulation. This legislation addresses that tension by carving out a narrow “safe harbour” for stabilising action, but only if strict conditions are met.
Importantly, the exemption is not general. It is tied to a defined product (the “Notes”) and a defined stabilising actor (Morgan Stanley & Co. International Limited and its related corporations). It also applies only during a short window—within 30 days from the date of issue of the Notes—and only for certain categories of counterparties and minimum transaction size thresholds.
What Are the Key Provisions?
Regulation 1 (Citation and commencement) provides the formal title and states that the Regulations came into operation on 23 February 2006. For practitioners, this matters because the exemption’s timing is anchored to the regulatory commencement date, and the stabilisation window is measured from the date of issue of the Notes (not from the regulation’s commencement). Still, the regulation must be in force for the exemption to be relied upon.
Regulation 2 (Definitions) is central because it constrains the exemption to a specific factual matrix.
First, “Notes” are defined narrowly as the 10-year Euro fixed rate notes due February 2016 issued by Shinsei Bank, Limited, for a principal amount of up to the Euro equivalent of US$1,000,000,000. This definition means that stabilising action in relation to other issuances—different maturity, different issuer, or different terms—will not qualify.
Second, “stabilising action” is defined as 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. This definition is both actor-specific and purpose-specific. It requires (i) the relevant entity to be Morgan Stanley & Co. International Limited or its related corporations, and (ii) the action must be undertaken for stabilisation/price maintenance.
Third, “securities” is incorporated by reference to the SFA definition in section 239(1). This ensures that the exemption operates within the SFA’s statutory taxonomy.
Regulation 3 (Exemption) is the operative provision. It states that Sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of any of the Notes, within 30 days from the date of issue, provided the stabilising action is carried out with one of the following counterparty categories:
(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 where 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 compliance perspective, the exemption is therefore conditional on four layers:
(i) Time: stabilising action must occur within 30 days from the date of issue of the Notes.
(ii) Subject matter: the action must be in respect of the defined “Notes”.
(iii) Actor and purpose: the action must fall within the definition of “stabilising action” (Morgan Stanley & Co. International Limited or related corporations, buying or offering to buy to stabilise/maintain market price).
(iv) Counterparty/transaction structure: the stabilising action must be with an institutional investor, a relevant person, or a principal acquirer meeting the minimum consideration threshold.
Practitioners should also note the drafting technique: the exemption is expressed as a non-application of specific SFA provisions (sections 197 and 198). While the extract does not reproduce those sections, the legal effect is clear—certain market conduct prohibitions are suspended for qualifying stabilising action. This is a classic regulatory approach: rather than rewriting the prohibitions, the subsidiary legislation carves out a narrow exception.
How Is This Legislation Structured?
The Regulations are structured as a short instrument with a conventional layout:
Regulation 1 sets out the citation and commencement date.
Regulation 2 provides definitions that determine the scope of the exemption, including the precise description of the Notes and the definition of stabilising action.
Regulation 3 contains the exemption itself, specifying which SFA provisions are disapplied, the time limit (30 days from issue), and the permitted categories of counterparties (institutional investors, relevant persons, or principal acquirers meeting a minimum consideration threshold).
There are no additional parts or schedules in the provided extract, reflecting the Regulations’ narrow, transaction-specific purpose.
Who Does This Legislation Apply To?
Although the exemption is framed as disapplying sections 197 and 198 of the SFA, it effectively applies to persons who take stabilising action that meets the definition in regulation 2. Because “stabilising action” is defined by reference to the actor (Morgan Stanley & Co. International Limited or its related corporations), the practical beneficiaries are those entities and their related corporate participants acting in the stabilisation capacity.
However, the exemption also depends on who the stabilising trades are conducted with. The Regulations permit stabilising action only when counterparties fall within the defined categories: institutional investors, relevant persons, or principal acquirers with at least $200,000 consideration per transaction (or equivalent). Therefore, even if the stabilising actor and timing are correct, trades that involve non-qualifying counterparties or transactions below the threshold may fall outside the exemption.
Why Is This Legislation Important?
This legislation is significant because it provides legal certainty for a regulated market practice—stabilisation—while preserving the integrity of market conduct rules. Without an exemption, stabilising purchases or offers to buy could be scrutinised as potentially inconsistent with prohibitions against improper conduct, misleading signals, or manipulation-like behaviour. The Regulations allow stabilisation to occur lawfully, but only within a carefully bounded framework.
For practitioners advising issuers, underwriters, or trading desks, the key value lies in the precision of the safe harbour. The Regulations are not a general authorisation for any stabilisation activity in any notes. Instead, they require strict alignment with: (i) the specific Notes; (ii) the specific stabilising actor; (iii) the 30-day post-issue period; and (iv) the counterparty/transaction conditions. This makes the Regulations highly usable for compliance planning, but also highly risky to rely on if deal terms or trading counterparties differ from the defined parameters.
From an enforcement standpoint, the exemption’s narrowness means that regulators can focus on whether trades were genuinely stabilisation (purpose), whether they were executed within the permitted time window, and whether counterparties and transaction sizes satisfy the statutory conditions. In practice, this typically requires robust trade documentation, monitoring of dates relative to the issue date, and careful classification of counterparties (institutional investor vs relevant person vs principal acquirer).
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular sections 197 and 198 (disapplied by the exemption), section 239(1) (definition of “securities”), section 275(2) (definition of “relevant person”), and section 337(1) (authorising power).
- Futures Act (as referenced in the provided metadata context).
- Stabilising Act (as referenced in the provided metadata 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. 7) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.