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
- Legislative Type: Subsidiary Legislation (S.L.)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Section 337(1) of the Securities and Futures Act
- Commencement: 17 March 2006
- Regulations Made: 6 March 2006
- Maker: Monetary Authority of Singapore (MAS) (Managing Director)
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
- Relevant Exempted Provisions: Sections 197 and 198 of the Securities and Futures Act
- Current Version 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 targeted exemption regulation. In essence, it allows certain “stabilising action” to be taken in relation to specific preference shares issued in March 2006, without triggering the prohibitions contained in Sections 197 and 198 of the Securities and Futures Act (SFA).
In plain language, the regulation recognises that, during the period immediately after a new securities issue, market makers or underwriters may engage in stabilisation activities to help manage short-term price volatility. Stabilisation is not meant to be ordinary trading; it is intended to support orderly trading and reduce disruptive price swings while the market absorbs the new issue.
However, stabilisation can also raise regulatory concerns because it may affect price formation. The SFA therefore contains restrictions on certain conduct. This subsidiary legislation carves out a narrow exception: stabilising actions meeting defined criteria (who does it, which securities are involved, and when) are exempted from the SFA’s prohibitions.
What Are the Key Provisions?
1. Citation and commencement (Regulation 1)
Regulation 1 provides the short title and states that the Regulations came into operation on 17 March 2006. For practitioners, this matters because the exemption is time-bound: the stabilising action must occur within a specified window from the date of issue of the relevant preference shares.
2. Definitions (Regulation 2)
Regulation 2 is crucial because it defines the scope of the exemption with precision. It introduces three categories of preference shares—Dollar Preference Shares, Euro Preference Shares, and Yen Preference Shares—each described by reference to the issuer, the instrument type, the issuance month, and the maximum principal amount.
All three are described as fixed to floating rate Non-Cumulative Guaranteed Preferred Securities issued by MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited, and MUFG Capital Finance 3 Limited respectively, with guarantees by Mitsubishi UFJ Financial Group, Inc. on a subordinated basis. The definitions also specify the maximum principal amounts (up to US$2.5 billion, up to EUR 1.5 billion, and up to ¥150 billion).
Regulation 2 also defines “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 the market price of those shares in Singapore or elsewhere.
Notably, the definition is both actor-specific (Merrill Lynch and related corporations) and purpose-specific (stabilising or maintaining market price). This means that stabilisation by other entities, or stabilisation for other purposes, would not fall within the exemption.
3. The exemption from Sections 197 and 198 (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 the defined preference shares, subject to strict conditions.
Time window: For each currency tranche, the stabilising action must be taken within 30 days from the date of issue of the relevant preference shares. This is the central temporal limitation. Practically, counsel should ensure that any stabilisation program, trading instructions, and recordkeeping align with the issue date and the 30-day period.
Permitted counterparties / participants: The exemption applies where the stabilising action is taken with one of the following categories of persons:
- (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 the pricing threshold is met
Pricing threshold for principal acquisitions: For the “principal” category, the consideration for the acquisition must be not less than $200,000 (or its equivalent in a foreign currency) for each transaction. The regulation clarifies that the consideration may be paid in cash or by exchange of securities or other assets. This threshold is designed to exclude small-lot or retail-type participation and to ensure that the exemption is confined to transactions of a certain scale.
Currency-specific application: Regulation 3 is structured in three subsections—(1) for Dollar Preference Shares, (2) for Euro Preference Shares, and (3) for Yen Preference Shares. While the conditions are materially the same, the regulation repeats them to ensure that the exemption is clearly tied to each defined tranche.
How Is This Legislation Structured?
This subsidiary legislation is concise and consists of an enacting formula followed by three substantive regulations:
Regulation 1 (Citation and commencement) sets the short title and commencement date.
Regulation 2 (Definitions) provides the interpretive framework. It defines the three preference share tranches, the meaning of “securities” by reference to the SFA, and—most importantly—the meaning of “stabilising action” by reference to the actor (Merrill Lynch and related corporations), the action (buying or offering to buy), the geography (taken in Singapore or elsewhere), and the purpose (stabilise or maintain market price).
Regulation 3 (Exemption) is the operative section. It exempts stabilising action from the application of Sections 197 and 198 of the SFA, but only when the stabilising action is taken within 30 days of issue and with specified categories of counterparties, including a minimum consideration threshold for principal acquisitions.
Who Does This Legislation Apply To?
The exemption is not a general permission for any market participant. It is limited by the definition of “stabilising action” and by the exemption’s conditions. In practice, it applies to Merrill Lynch, Pierce, Fenner & Smith Incorporated and its related corporations when they take stabilising actions in relation to the specified MUFG-related preference shares.
It also applies only in transactions involving the specified counterpart categories: institutional investors, relevant persons (as defined in the SFA), or principal acquirers meeting the $200,000 (or equivalent) per transaction minimum consideration requirement. Therefore, a practitioner should treat this as a compliance “gate”: stabilisation activity outside these categories would remain subject to Sections 197 and 198 of the SFA.
Why Is This Legislation Important?
This regulation is important because it balances two regulatory objectives that often conflict in securities issuance: (1) allowing stabilisation to support orderly markets during the immediate post-issue period, and (2) preventing conduct that could distort price discovery. By exempting stabilising actions from Sections 197 and 198, MAS permits a controlled form of market intervention—within strict boundaries.
For lawyers advising issuers, underwriters, and trading desks, the practical impact is significant. The exemption is time-limited (30 days from issue), security-specific (three defined preference share tranches), and participant-specific (Merrill Lynch and related corporations). Counsel should therefore ensure that stabilisation documentation, trading policies, and communications are aligned with the exemption’s definitions and conditions.
Additionally, the exemption’s counterparty and pricing thresholds are compliance-critical. The $200,000 minimum consideration per transaction for principal acquisitions is a clear quantitative criterion. In structuring stabilisation arrangements, legal teams should verify that any trades intended to rely on the exemption meet this threshold and that counterparties fall within the permitted categories.
Finally, because the exemption is framed as “Sections 197 and 198 shall not apply,” it is best understood as a narrow carve-out rather than a broad authorisation of stabilisation. Practitioners should still consider whether other market conduct rules, disclosure obligations, or other regulatory requirements apply to stabilisation activities, even if Sections 197 and 198 are disapplied.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly Sections 197, 198, 275(2), and the definition framework referenced in Regulation 2
- Futures Act (as referenced in the provided metadata)
- Stabilising Act (as referenced in the provided metadata)
- Timeline (legislation timeline reference as provided in the extract)
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.