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)
- Legal Basis: Powers under section 337(1) of the Securities and Futures Act
- Citation and commencement: Comes into operation on 17 March 2006
- Regulation number: SL 163/2006 (dated 17 March 2006)
- Key provisions: Section 2 (definitions); Section 3 (exemption)
- Legislative status: Current version as at 27 March 2026 (per provided extract)
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 narrowly targeted set of exemptions within Singapore’s broader market conduct framework for securities. In essence, it allows certain “stabilising actions” to be taken in relation to a specific set of preference shares without triggering particular prohibitions in the Securities and Futures Act (the “SFA”).
Stabilising action is a concept commonly used in capital markets. During or shortly after the issuance of securities, market participants may take steps intended to support or stabilise the trading price, typically to reduce volatility that can arise from initial supply/demand imbalances. However, stabilisation can also raise regulatory concerns because it may resemble market manipulation if not properly constrained. Singapore’s SFA therefore contains rules that restrict conduct that could distort market prices.
This subsidiary legislation creates a time-limited and condition-specific carve-out. It applies to stabilising actions taken in respect of three categories of “preference shares” issued in March 2006 by MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited, and MUFG Capital Finance 3 Limited, respectively (the “Dollar Preference Shares”, “Euro Preference Shares”, and “Yen Preference Shares”). The exemption is available only if the stabilising action is taken within a defined window after issuance and only by (or for) specified categories of counterparties, including institutional investors and certain persons acquiring the shares as principal at or above a minimum consideration threshold.
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
Regulation 1 provides the short title and commencement date. The Regulations may be cited as the “Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 3) Regulations 2006” and come into operation on 17 March 2006. For practitioners, this matters primarily for determining the regulatory framework applicable to stabilisation activities occurring around the issuance period.
2. Definitions (Regulation 2)
Regulation 2 is critical because the exemption turns entirely on whether the relevant instruments and conduct fall within the defined terms. The Regulations define:
- 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$2.5 billion, guaranteed by Mitsubishi UFJ Financial Group, Inc. on a subordinated basis.
- Euro Preference Shares: similar securities issued by MUFG Capital Finance 2 Limited, up to EUR 1.5 billion, guaranteed on a subordinated basis.
- Yen Preference Shares: similar securities issued by MUFG Capital Finance 3 Limited, up to JPY 150 billion, guaranteed on a subordinated basis.
- “securities”: adopts the meaning in section 239(1) of the SFA.
- “stabilising action”: 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 specified preference shares in order to stabilise or maintain their market price in Singapore or elsewhere.
For legal analysis, the definition of “stabilising action” is especially important because it is both actor-specific and purpose-specific. The exemption is not a general permission for any market participant to stabilise. It is limited to stabilising actions taken by Merrill Lynch (or related corporations) and only where the purpose is to stabilise or maintain the market price of the relevant preference shares.
3. The exemption from sections 197 and 198 of the SFA (Regulation 3)
The operative provision is Regulation 3. It states that sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of each class of preference shares, subject to the conditions set out in subsections (1) to (3).
Time window: For each class of preference shares, the stabilising action must be taken within 30 days from the date of issue of the relevant preference shares. This is a hard temporal limitation. Practitioners should therefore identify the “date of issue” precisely (typically the issue date stated in the offering documentation or final terms) and ensure that any stabilisation-related trades or offers fall within the 30-day period.
Permitted counterparties / categories of persons: For each class of preference shares, stabilising action is exempt only if it is taken with one of the following categories:
- (a) an institutional investor
- (b) a “relevant person” as defined in section 275(2) of the SFA
- (c) a person who acquires the preference shares as principal, provided that the consideration 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.
Practical effect: The exemption does not remove all market conduct restrictions. Instead, it suspends the application of the specific SFA provisions (sections 197 and 198) to the defined stabilising actions, but only when the stabilisation is conducted within the specified 30-day period and only in relation to transactions involving the specified categories of counterparties and minimum consideration threshold for principal acquisitions.
4. Application across currencies (subsections (1)–(3))
Although the structure is the same for Dollar, Euro, and Yen Preference Shares, the Regulations treat each class separately. This matters because the exemption is instrument-specific: stabilising action in relation to one class will not automatically qualify under the exemption for another class unless it falls within the relevant definition and conditions.
How Is This Legislation Structured?
The Regulations are short and consist of an enacting formula and three substantive provisions:
- Regulation 1 (Citation and commencement): sets the short title and commencement date (17 March 2006).
- Regulation 2 (Definitions): defines the three classes of preference shares, the term “securities” by reference to the SFA, and the key conduct term “stabilising action” (including who may take the action and the stabilisation purpose).
- Regulation 3 (Exemption): provides the exemption from sections 197 and 198 of the SFA, with conditions on timing (within 30 days of issue) and counterparties (institutional investors, relevant persons, or principal acquirers meeting the $200,000 minimum consideration threshold).
For practitioners, the brevity is itself a feature: the Regulations are designed as a targeted instrument exemption rather than a comprehensive market conduct regime.
Who Does This Legislation Apply To?
Although the exemption is drafted in terms of stabilising action and counterparties, the practical scope is best understood through the definition of “stabilising action.” The stabilising action must be taken in Singapore or elsewhere by Merrill Lynch, Pierce, Fenner & Smith Incorporated or its related corporations. Therefore, the Regulations primarily benefit the stabilisation activities of that group in relation to the specified preference shares.
However, the exemption also depends on the identity and status of the persons with whom stabilising transactions are conducted. The stabilising action must be taken with an institutional investor, a relevant person (as defined in section 275(2) of the SFA), or a principal acquirer meeting the minimum consideration threshold of $200,000 (or equivalent) per transaction. Accordingly, issuers, arrangers, dealers, and compliance teams must ensure that counterparties and trade documentation align with these categories.
Why Is This Legislation Important?
This Regulations matters because it demonstrates how Singapore regulates stabilisation in a way that balances market integrity with practical realities of securities issuance. Stabilisation can be legitimate and intended to reduce disorderly trading, but it can also create risks of price distortion. By exempting stabilising actions from specific SFA prohibitions, the Regulations provide legal certainty for a particular issuance and a particular stabilisation participant (Merrill Lynch and related corporations).
From a compliance perspective, the conditions are the heart of the exemption. The 30-day post-issue window and the counterparty/consideration requirements create clear operational constraints. Firms relying on the exemption must implement controls to track the issue date, monitor the timing of stabilisation trades and offers, verify counterparties’ status (institutional investor or relevant person), and ensure that principal acquisitions meet the minimum consideration threshold. Failure to satisfy these conditions could mean that sections 197 and 198 of the SFA would apply, potentially exposing the firm and individuals involved to regulatory enforcement or other legal consequences.
Finally, the instrument-specific nature of the exemption is significant. The definitions of the Dollar, Euro, and Yen Preference Shares are detailed and tied to specific issuers, amounts, and guarantees. This suggests that the exemption was designed for a particular transaction in March 2006. Practitioners should therefore treat it as a transaction-specific regulatory permission rather than a template for future deals.
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular sections 197, 198, 239(1), 275(2), and the enabling power in 337(1).
- Futures Act (as referenced in the provided metadata context)
- Stabilising Act (as referenced in the provided metadata context)
- Timeline (legislative timeline reference for version control)
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.