Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 3) Regulations 2006
- Act Code: SFA2001-S163-2006
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Power Used: Section 337(1) of the Securities and Futures Act
- Citation: SL 163/2006
- Commencement: 17 March 2006
- Key Provisions: Section 1 (citation and commencement); Section 2 (definitions); Section 3 (exemption)
- Relevant Act Provisions Exempted: Sections 197 and 198 of the Securities and Futures Act
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 3) Regulations 2006 is a targeted regulatory instrument. In plain terms, it creates a limited exemption from certain “market conduct” rules in the Securities and Futures Act for stabilising activities carried out in connection with specific preference shares issued in March 2006.
Stabilising action is a practice commonly associated with securities offerings. During an initial issuance or trading period, a stabilising participant may buy (or offer to buy) securities to help maintain or stabilise the market price. Regulators generally restrict such conduct because it can affect price formation and may be used improperly. This legislation therefore does not legalise stabilisation broadly; instead, it carves out a narrow exemption for stabilising action relating to defined “Dollar Preference Shares”, “Euro Preference Shares”, and “Yen Preference Shares”.
The exemption is time-bound (within 30 days from the date of issue) and participant-bound (only certain categories of counterparties/investors are covered). It also includes a transaction-size threshold (minimum consideration of $200,000 per transaction, or its foreign-currency equivalent). The result is a carefully calibrated permission that supports orderly market functioning during an offering while preserving the integrity of Singapore’s market conduct framework.
What Are the Key Provisions?
1. Citation and commencement (Section 1)
Section 1 provides the short title and states that the Regulations come into operation on 17 March 2006. For practitioners, this matters when assessing whether stabilising conduct falls within the regulatory regime applicable at the relevant time.
2. Definitions (Section 2)
Section 2 is central because the exemption is only available for stabilising action in respect of particular instruments and by particular persons. The Regulations define three classes of preference shares issued by MUFG Capital Finance entities and guaranteed by Mitsubishi UFJ Financial Group, Inc. on a subordinated basis:
- “Dollar Preference Shares”: fixed to floating rate, Non-Cumulative Guaranteed Preferred Securities issued in March 2006 by MUFG Capital Finance 1 Limited, up to US$2,500,000,000.
- “Euro Preference Shares”: similar instruments issued by MUFG Capital Finance 2 Limited, up to EURO 1,500,000,000.
- “Yen Preference Shares”: similar instruments issued by MUFG Capital Finance 3 Limited, up to ¥150,000,000,000.
The Regulations also define “stabilising action” as an action taken in Singapore or elsewhere by Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any of its related corporations) to buy, or to offer or agree to buy, the relevant preference shares in order to stabilise or maintain their market price in Singapore or elsewhere. This is a critical limitation: the exemption is not for any market participant; it is tied to Merrill Lynch and its related corporations.
Finally, Section 2 defines “securities” by reference to the Securities and Futures Act (section 239(1)). It also refers to “relevant person” as defined in section 275(2) of the Act, which is important for determining who qualifies under the exemption.
3. The exemption from Sections 197 and 198 (Section 3)
Section 3 is the operative provision. It states that Sections 197 and 198 of the Act shall not apply to stabilising action taken in respect of the specified preference shares, subject to conditions.
Time limit: For each class of preference shares, the stabilising action must be taken within 30 days from the date of issue of that class of shares. This is a hard boundary; stabilising conduct outside the 30-day window would not benefit from the exemption.
Permitted counterparties/investor categories: The exemption applies only where the stabilising action is taken with one of the following categories:
- (a) an institutional investor
- (b) a relevant person (as defined in section 275(2) of the Act)
- (c) a person who acquires the preference shares as principal, subject to a minimum consideration threshold
Minimum consideration threshold (for principal acquisitions): Where the counterparty is a person acquiring as principal, the consideration for the acquisition must be not less than $200,000 (or its equivalent in a foreign currency) for each transaction. The Regulations clarify that the consideration may be paid in cash or by exchange of securities or other assets. This threshold is designed to confine the exemption to transactions of a certain scale, reducing the risk of stabilisation affecting retail or small-scale trading.
Instrument-specific application: Section 3(1) covers Dollar Preference Shares; Section 3(2) covers Euro Preference Shares; and Section 3(3) covers Yen Preference Shares. The structure is parallel, but the exemption is explicitly tied to each defined class. Practically, this means counsel should verify the exact instrument description and issuance details to ensure the stabilisation activity is “in respect of” the defined shares.
How Is This Legislation Structured?
These Regulations are short and comprise:
- Section 1 (Citation and commencement): establishes the legal name and the effective date (17 March 2006).
- Section 2 (Definitions): defines the relevant preference shares, the meaning of “stabilising action”, and cross-references key terms in the Securities and Futures Act.
- Section 3 (Exemption): provides the exemption from Sections 197 and 198 of the Act, with conditions on time, participant categories, and transaction value for principal acquisitions.
Notably, the Regulations do not include extensive procedural requirements in the extract provided; instead, the legal effect is achieved through the exemption mechanism in Section 3, supported by precise definitions in Section 2.
Who Does This Legislation Apply To?
The exemption is directed at stabilising action carried out by Merrill Lynch, Pierce, Fenner & Smith Incorporated (or its related corporations) in connection with the defined preference shares. Therefore, the practical “regulated party” is the stabilising participant and its related entities, insofar as they engage in buying (or offering/agreeing to buy) the specified securities to stabilise or maintain market price.
However, the exemption also depends on the counterparty/investor category involved in the stabilising transactions. Stabilising action must be taken with an institutional investor, a relevant person, or a principal acquirer meeting the $200,000 minimum consideration threshold per transaction. Accordingly, parties structuring stabilisation trades must ensure that the counterparties and transaction terms fall within these categories.
Why Is This Legislation Important?
This Regulations is important because it illustrates how Singapore’s market conduct framework balances two competing objectives: (1) preventing manipulative or misleading market practices, and (2) allowing legitimate market stabilisation during securities issuance. By exempting stabilising action from specified statutory provisions, the Regulations provides legal certainty for stabilisation activities that would otherwise risk breaching the general prohibitions in Sections 197 and 198 of the Securities and Futures Act.
For practitioners, the key value lies in the precision of the exemption. It is not a general authorisation for stabilisation; it is limited by:
- specific instruments (the three defined preference share classes with defined issuance parameters);
- specific stabilising participant (Merrill Lynch and related corporations);
- specific time window (within 30 days from issue); and
- specific counterparties and transaction size (institutional investors, relevant persons, or principal acquirers with at least $200,000 consideration per transaction).
From an enforcement and compliance perspective, these limitations mean that internal controls should focus on trade documentation and eligibility checks: confirming the instrument identity, verifying the trade date relative to the 30-day period, confirming the counterparty classification, and ensuring the consideration threshold is met where applicable. Where stabilising action occurs “in Singapore or elsewhere”, counsel should also consider cross-border operational practices to ensure the exemption’s conditions are satisfied regardless of where the trades are executed.
Finally, the Regulations’ narrow scope makes it a useful reference point when advising on whether stabilisation conduct is permissible under Singapore law. It also signals that MAS can grant exemptions by regulation where market practice and investor protection considerations align—provided the exemption is tightly drafted and bounded.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly Sections 197, 198, 239(1), 275(2), and the regulation-making power in section 337(1)
- Futures Act (as referenced in the legislation metadata)
- Stabilising Act (as referenced in the legislation metadata)
- Timeline (legislation timeline/versioning reference)
Source Documents
This article provides an overview of the Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 3) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.