Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) Regulations 2005
- Act Code: SFA2001-S8-2005
- Type: Subsidiary Legislation (sl)
- Authorising Act: Securities and Futures Act (Cap. 289), specifically section 337(1)
- Enacting Formula: Made by the Monetary Authority of Singapore (MAS)
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) Regulations 2005
- Commencement: 6 January 2005
- Key Provisions: Section 1 (citation and commencement); Section 2 (definitions); Section 3 (exemption)
- Regulatory Focus: Exemption from market conduct provisions for stabilising actions relating to specified notes
- Specified Instrument: 3-year floating rate notes due December 2007 issued by National Agricultural Cooperative Federation (principal amount up to ¥10,000,000,000)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) Regulations 2005 (“Stabilising Action Regulations”) create a targeted exemption from certain “market conduct” restrictions in the Securities and Futures Act (the “SFA”) for stabilising activities carried out in connection with a particular issuance of notes.
In plain terms, the Regulations recognise that, in some debt capital market transactions, market participants may undertake limited buying (or offers to buy) to stabilise or support the trading price of the relevant notes during an initial period after issuance. Such stabilisation can reduce volatility and help the issuer’s securities settle into the market. However, stabilisation can also resemble prohibited conduct if it is not carefully bounded. The Regulations therefore carve out a narrow exception, allowing stabilising action for a defined set of notes and within a defined timeframe.
The scope is deliberately narrow: it applies only to stabilising action taken in respect of the specified “Notes” and only within 30 days from the date of issue. It also restricts who may take the stabilising action by reference to categories of persons under the SFA—either a person referred to in section 274 of the SFA or a “sophisticated investor” as defined in section 275(2) of the SFA.
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 6 January 2005. This matters for practitioners because it fixes the temporal scope for any reliance on the exemption and confirms that the exemption is available for stabilising actions undertaken after commencement (subject to the additional 30-day limitation in section 3).
Section 2 (Definitions) is central to understanding the Regulations’ narrow reach. It defines two key terms:
- “Notes” are defined with precision as 3-year floating rate notes due December 2007 issued by National Agricultural Cooperative Federation with a principal amount of up to ¥10,000,000,000.
- “stabilising action” is defined as an action taken in Singapore or elsewhere by Daiwa Securities SMBC Hong Kong 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.
From a compliance perspective, these definitions mean that the exemption is not generic. It is tied to a specific instrument and a specific stabilising actor (Daiwa Securities SMBC Hong Kong Limited and its related corporations). A different issuer, different note terms, or stabilising by a different institution would not fall within the definition, even if the economic purpose (price support) is similar.
Section 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, with stabilising action carried out by either:
- (a) a person referred to in section 274 of the SFA; or
- (b) a sophisticated investor as defined in section 275(2) of the SFA.
Although the extract does not reproduce sections 197 and 198, the structure indicates that those sections contain prohibitions or restrictions relevant to market conduct (commonly, rules against market manipulation, misleading transactions, or improper trading practices). The Regulations therefore function as a conditional “safe harbour” for stabilising conduct that would otherwise be caught by those prohibitions.
Two practical compliance points follow directly from section 3:
- Time limit: stabilising action must occur within 30 days from the date of issue. Practitioners should ensure that deal logs, trade confirmations, and internal approvals can demonstrate compliance with this window.
- Person/category limit: stabilising action must be taken by a qualifying person (section 274 category) or by a sophisticated investor (section 275(2) definition). This requires careful mapping of the counterparty and the role of the stabilising entity in the transaction.
In addition, because “stabilising action” is defined in section 2 as being taken by Daiwa Securities SMBC Hong Kong Limited (or related corporations), the exemption effectively combines three layers of limitation: (i) the specified Notes, (ii) the specified stabilising actor, and (iii) the qualifying person/investor category plus the 30-day period.
How Is This Legislation Structured?
The Regulations are extremely concise and consist of three sections:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions for “Notes” and “stabilising action”.
- Section 3 creates the exemption from specified SFA provisions (sections 197 and 198) for stabilising action meeting the conditions.
There are no Parts, schedules, or additional procedural requirements in the text provided. For practitioners, this means the legal analysis largely turns on interpreting the defined terms and ensuring that the factual matrix (instrument, actor, timeframe, and investor category) fits squarely within section 3.
Who Does This Legislation Apply To?
The Regulations apply to persons involved in stabilising action in relation to the specified notes—particularly Daiwa Securities SMBC Hong Kong Limited and its related corporations, acting in Singapore or elsewhere, to buy or offer to buy the Notes for price stabilisation purposes.
However, the exemption is not available to all market participants. Section 3 limits the exemption to stabilising action taken within 30 days from issue and carried out by either (i) a person referred to in section 274 of the SFA or (ii) a sophisticated investor under section 275(2). Accordingly, a practitioner should treat the exemption as a fact-specific compliance tool: it is available only when the stabilising activity is performed by (or for) the relevant qualifying persons and investors, and when the activity is demonstrably stabilisation of the defined Notes.
Why Is This Legislation Important?
This Regulations is important because it provides a narrow regulatory pathway for legitimate stabilisation activities in a debt issuance context. Without such an exemption, stabilising trades could be argued to fall within broader market conduct prohibitions in the SFA. The Regulations therefore reduce legal uncertainty for transaction participants—particularly arrangers, dealers, and investors—by clarifying when stabilising action will not trigger the application of sections 197 and 198.
From an enforcement and risk-management standpoint, the exemption also signals MAS’s approach: stabilisation is permissible only when tightly bounded. The combination of (i) a defined instrument, (ii) a defined stabilising actor, (iii) a defined timeframe (30 days), and (iv) a defined investor/person category creates a controlled environment where stabilisation is less likely to be used as a cover for market manipulation.
For practitioners advising on documentation and compliance, the Regulations highlight the need for robust transaction records. Advisers should ensure that stabilising activity is properly authorised internally, that trade execution and reporting can evidence the 30-day window, and that the parties involved meet the relevant SFA categories. Where stabilisation is conducted “in Singapore or elsewhere,” counsel should also consider cross-border execution and ensure that the exemption’s conditions are satisfied regardless of where trades occur.
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 legislation metadata context)
- Stabilising Act (as referenced in the legislation metadata context)
- Legislation Timeline (for version control and amendments tracking)
Source Documents
This article provides an overview of the Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) Regulations 2005 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.