Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 8) Regulations 2004
- Act Code: SFA2001-S146-2004
- Type: Subsidiary Legislation (sl)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Power Used: Section 337(1) of the Securities and Futures Act
- Commencement: 29 March 2004
- Enacting Body: Monetary Authority of Singapore (MAS)
- Key Provisions: Section 2 (definitions); Section 3 (exemption)
- Regulatory Focus: Exemption from market conduct provisions for stabilising actions relating to specified notes
- Specified Instrument: “Notes” = 10-year fixed rate subordinated notes due April 2014 issued by Korea Highway Corporation (up to US$750 million)
- Specified Stabilising Parties: Citigroup Global Markets Inc.; Deutsche Bank Securities Inc.; JP Morgan Securities Ltd; and their related corporations
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) (No. 8) Regulations 2004 (“Stabilising Action (Notes) Regulations”) is a targeted regulatory instrument. In essence, it creates a narrow exemption from certain market conduct rules in the Securities and Futures Act (“SFA”) for stabilising activity undertaken in connection with a particular issuance of notes.
Stabilising action is a common feature of securities issuance and trading. Under a stabilisation framework, certain market participants may take steps—such as buying, or offering or agreeing to buy—during a limited period to help maintain orderly trading conditions and reduce excessive price volatility immediately after issuance. However, stabilisation can overlap with conduct that market conduct rules seek to regulate, such as restrictions on manipulation or improper dealing. This Regulations addresses that tension by carving out an exemption, but only for a defined set of circumstances.
In practical terms, the Regulations permits specified entities to engage in stabilising action relating to the defined “Notes” without the usual consequences that would otherwise follow from sections 197 and 198 of the SFA. The exemption is time-limited and subject to conditions regarding the counterparties involved in the stabilising transactions.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the short title and sets the commencement date. The Regulations “shall come into operation on 29th March 2004.” This matters for practitioners because stabilising activity must be assessed against the law in force at the relevant time. For issuances and dealing programmes, timing is often critical—especially where exemptions are time-bound.
Section 2 (Definitions) defines two central terms: “Notes” and “stabilising action.” The “Notes” are specifically identified as the “10-year fixed rate subordinated notes due April 2014 issued by Korea Highway Corporation for a principal amount of up to US$750 million.” This is not a general stabilisation exemption for any notes; it is tied to a particular issuance and instrument description.
The definition of “stabilising action” is equally specific. It refers to an action taken in Singapore or elsewhere by named entities—Citigroup Global Markets Inc., Deutsche Bank Securities Inc., JP Morgan Securities Ltd—or any of 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. The definition therefore captures both actual purchases and conditional commitments (offers or agreements to buy), and it is not limited to Singapore trading venues.
Section 3 (Exemption) is the operative provision. It states that, subject to paragraph (2), sections 197 and 198 of the SFA “shall not apply” to stabilising action carried out in respect of any of the Notes with either:
- (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.
Although the extract does not reproduce sections 197, 198, 274, or 275, the structure indicates that the SFA contains market conduct prohibitions that would otherwise restrict stabilising behaviour. This Regulations removes that restriction for stabilising action conducted with particular categories of counterparties—either those falling within the section 274 category or those who qualify as sophisticated investors under the SFA.
Counterparty limitation is a key compliance point. For a practitioner advising an arranger, dealer, or stabilising agent, the exemption is not merely about who is stabilising (the named banks and their related corporations) and what is being stabilised (the specified Notes). It is also about who the stabilising transactions are with. If stabilising purchases are made with counterparties outside the permitted categories, the exemption may not apply, and the underlying SFA provisions could be engaged.
Section 3(2) adds a further limitation: the exemption “shall not apply to any stabilising action carried out at any time after the expiry of the period of 30 calendar days from the date of the issuance of the Notes.” This is a hard stop. Even if the stabilising action is otherwise within the permitted counterparties and carried out by the specified entities, stabilisation beyond the 30-day window would fall outside the exemption.
In summary, the exemption is conditional and time-limited: (i) stabilising action must relate to the defined Notes; (ii) it must be carried out by the defined stabilising parties (or their related corporations); (iii) it must be undertaken with permitted counterparties (section 274 persons or sophisticated investors); and (iv) it must occur within 30 calendar days from the issuance date.
How Is This Legislation Structured?
The Regulations are structured as a short, three-section instrument:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions for the key terms used in the exemption.
- Section 3 contains the exemption from the SFA’s market conduct provisions, including the counterparty conditions and the 30-day time limit.
There are no additional parts or schedules in the extract. The legislative design is therefore “minimal and targeted”: it does not create a general stabilisation regime, but rather grants an exemption for a specific issuance and a defined stabilisation conduct pattern.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action in respect of the specified “Notes” issued by Korea Highway Corporation. The exemption is relevant to the named stabilising entities—Citigroup Global Markets Inc., Deutsche Bank Securities Inc., JP Morgan Securities Ltd—and their related corporations, because the definition of “stabilising action” is anchored to actions taken by those entities (or their related corporations).
However, the exemption’s practical reach extends beyond the stabilising entities. Because Section 3(1) conditions the exemption on the identity of the counterparty (section 274 persons or sophisticated investors), issuers, arrangers, dealers, and compliance teams must ensure that stabilising trades are executed with eligible counterparties. If stabilising activity is carried out with ineligible counterparties, the exemption may not protect the conduct, and the underlying SFA market conduct provisions could apply.
Why Is This Legislation Important?
This Regulations is important because it clarifies when stabilising conduct is permissible without triggering certain SFA market conduct prohibitions. In securities offerings, stabilisation can be commercially desirable and may be expected by markets and regulators, but it must be reconciled with statutory restrictions designed to prevent market abuse. By granting a conditional exemption, MAS enables stabilisation while maintaining guardrails.
For practitioners, the most significant value lies in the precision of the exemption. It is not a blanket authorisation. It is limited to: (i) a particular instrument (the 10-year fixed rate subordinated notes due April 2014, up to US$750 million); (ii) specified stabilising participants; (iii) specified counterparty categories; and (iv) a strict 30-calendar-day period from issuance. These limitations are exactly the kinds of details that determine whether a stabilisation programme is compliant.
From an enforcement and risk perspective, the time limit is particularly critical. Stabilisation programmes often involve operational planning, monitoring of trading activity, and documentation of stabilising orders. If stabilising purchases continue beyond the 30-day period, the exemption ceases to apply, potentially exposing the stabilising entities (and possibly their counterparties, depending on the conduct) to regulatory scrutiny under the SFA provisions that were otherwise disapplied.
Finally, the counterparty condition underscores that compliance is not only about “what you do,” but also “with whom you do it.” A lawyer advising on stabilisation should therefore coordinate with trading desks and legal/compliance teams to confirm counterparty eligibility under the relevant SFA definitions and categories.
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 timeline context).
- Stabilising Act (as referenced in the provided metadata timeline context).
- Timeline / Legislation history resources (for version control and amendment tracking, as indicated by the legislation interface).
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. 8) Regulations 2004 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.