Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) Regulations 2006
- Act Code: SFA2001-S25-2006
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289), section 337(1)
- Commencement: 16 January 2006
- Enacting date: Made on 13 January 2006
- Legislative status: Current version as at 27 March 2026
- Key provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (including “Notes” and “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the Securities and Futures Act for specified stabilising action
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Notes) Regulations 2006 (“Stabilising Action Exemption Regulations”) creates a targeted regulatory exemption within Singapore’s market conduct framework. In essence, it allows certain market stabilisation activity to occur in relation to a specific issuance of notes without triggering particular statutory prohibitions that would otherwise apply.
Singapore’s market conduct rules in the Securities and Futures Act (the “SFA”) are designed to protect market integrity—particularly by restricting conduct that could mislead investors or distort price formation. However, stabilisation is a recognised market practice in certain capital markets transactions. Stabilisation activity is typically undertaken by an appointed dealer or its affiliates to mitigate excessive volatility immediately after issuance. The law therefore balances two competing interests: (i) preventing market manipulation and (ii) permitting legitimate stabilisation within defined boundaries.
This subsidiary legislation is narrow in scope. It does not create a general stabilisation regime for all securities. Instead, it defines a particular set of “Notes” and a particular category of “stabilising action”, and then grants an exemption from the operation of specific SFA provisions for stabilising actions taken within a defined time window after issuance.
What Are the Key Provisions?
1. Citation and commencement (Section 1)
Section 1 provides the formal citation and states that the Regulations come into operation on 16 January 2006. For practitioners, this is important for determining the regulatory baseline for any stabilisation activity undertaken around the issuance period.
2. Definitions (Section 2)
Section 2 is the heart of the Regulations because it tightly constrains what is covered. Three defined terms are central:
- “Notes” are defined with precision: the Regulations apply to “the 5-year zero coupon resettable onward starting equity linked securities due January 2011” issued by Glenmark Pharmaceuticals Limited for a principal amount of up to US$30 million. This is a transaction-specific definition, meaning the exemption is not intended to apply to other note issuances.
- “securities” has the same meaning as in section 239(1) of the SFA. This cross-reference ensures the term is interpreted consistently with the SFA’s general definitions.
- “stabilising action” is defined as an action taken in Singapore or elsewhere by J.P. Morgan Securities Ltd (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 (J.P. Morgan Securities Ltd and related corporations) and purpose-specific (stabilisation/price maintenance).
Practically, this means that if stabilisation is attempted by a different entity, or if the purpose is not stabilisation/price maintenance, the exemption may not apply. Lawyers advising issuers, arrangers, and dealers should therefore ensure that the stabilisation programme is documented in a way that aligns with the defined purpose and the defined participants.
3. The exemption (Section 3)
Section 3 provides the operative relief. It states 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
- (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 compliance perspective, Section 3 imposes three layers of conditions:
- Time condition: stabilising action must be taken within 30 days from the date of issue.
- Security condition: the stabilising action must be in respect of the defined “Notes”.
- Counterparty/consideration condition: the stabilising action must be undertaken with institutional investors, relevant persons, or principal acquirers meeting the minimum consideration threshold.
Lawyers should pay close attention to the phrase “with” in Section 3. The exemption is not simply about who performs stabilisation; it is also about the category of the counterparty to the stabilisation-related dealing. This will affect how trading counterparties are identified, how records are kept, and how deal documentation is structured.
Minimum consideration threshold (Section 3(c))
The $200,000 threshold is a significant practical safeguard. It is designed to ensure that the exemption does not extend to small retail-type transactions. The Regulations also clarify that the consideration may be paid either in cash or by exchange of securities or other assets. This flexibility is important for structured transactions where consideration might be non-cash.
For practitioners, the key is evidentiary: the firm should be able to demonstrate that the transaction value meets or exceeds the threshold for each transaction. Where consideration is exchanged, careful valuation and documentation will be necessary to show compliance.
How Is This Legislation Structured?
The Regulations are short and structured into three sections:
- Section 1 (Citation and commencement): identifies the Regulations and their effective date.
- Section 2 (Definitions): defines the scope terms—particularly “Notes” and “stabilising action”—which determine whether the exemption is available.
- Section 3 (Exemption): sets out the exemption from SFA sections 197 and 198, including the 30-day limit and the counterparty/consideration conditions.
There are no additional parts or schedules in the extract provided. The Regulations function as a targeted carve-out rather than a comprehensive stabilisation code.
Who Does This Legislation Apply To?
In practical terms, the Regulations apply to market participants involved in stabilising dealings in the defined Notes—specifically, stabilising action taken by J.P. Morgan Securities Ltd or its related corporations. The exemption is therefore most relevant to the dealer/arranger responsible for the stabilisation programme and to the counterparties with whom stabilisation trades are executed.
However, the exemption’s availability depends on the identity and status of the counterparty. Section 3 restricts the exemption to stabilising action conducted with institutional investors, relevant persons (as defined in the SFA), or principal acquirers meeting the $200,000 per transaction minimum consideration threshold. Accordingly, issuers, dealers, and compliance teams must assess counterparty classification and transaction value to determine whether the exemption can be relied upon.
Why Is This Legislation Important?
This legislation is important because it demonstrates how Singapore’s market conduct framework accommodates legitimate market practices while preserving investor protection. Stabilisation can reduce disorderly price movements after issuance, but it can also raise concerns about artificial price support. By granting a time-limited and transaction-specific exemption, the Regulations allow stabilisation to occur without applying certain SFA prohibitions—provided the activity stays within defined boundaries.
For practitioners, the key value of the Regulations lies in their precision. They are not a broad permission; they are a carefully circumscribed carve-out. This means that compliance advice must be highly fact-specific: the exact instrument, the exact stabilising actor, the timing relative to the issue date, and the counterparty category and transaction value all matter.
From an enforcement and risk perspective, relying on the exemption without meeting its conditions could expose the stabilising dealer and related parties to regulatory action under the underlying SFA provisions that remain applicable. Therefore, legal teams should treat Section 3 as a compliance checklist: confirm the Notes fall within the defined description; confirm the stabilising action is performed by the defined entity/related corporations; confirm the activity occurs within 30 days; and confirm counterparties and consideration meet the statutory thresholds.
Related Legislation
- Securities and Futures Act (Cap. 289): In particular, sections 197, 198, 239(1), 275(2), and the authorising provision 337(1).
- Futures Act: (listed in the metadata as related legislation; relevant where market conduct concepts are harmonised across regimes).
- Stabilising Act: (listed in the metadata; relevant for understanding stabilisation concepts and policy context).
- Timeline / Legislation timeline: for version control and confirmation of the applicable text 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) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.