Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 4) Regulations 2006
- Act Code: SFA2001-S171-2006
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (SFA), specifically section 337(1)
- Legislative Citation: SL 171/2006
- Commencement: 23 March 2006
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Key Provisions: Section 1 (citation and commencement); Section 2 (definitions); Section 3 (exemption)
- Regulatory Focus: Exemption from market conduct restrictions for “stabilising action” relating to specified preference shares
- Specified Instrument: US$ Non-Cumulative Perpetual Preferred Securities issued in March 2006 by Shinsei Finance II (Cayman) Limited (up to US$1,000,000,000)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 4) Regulations 2006 (“Stabilising Action (Preference Shares) Regulations”) creates a targeted regulatory exemption within Singapore’s market conduct framework. In essence, it allows certain stabilising trades to occur without triggering specific prohibitions in the Securities and Futures Act (SFA) during a limited post-issuance period.
Market conduct rules in the SFA are designed to protect market integrity—particularly by restricting conduct that could mislead investors or distort trading prices. However, in certain capital market transactions, stabilisation is a recognised practice. Under stabilisation arrangements, an underwriter or stabilising agent may buy (or offer to buy) securities to help maintain orderly trading and reduce excessive price volatility immediately after issuance.
This Regulations instrument is narrow and transaction-specific. It does not create a general stabilisation regime for all securities. Instead, it exempts stabilising action in respect of a particular class of preference shares issued in March 2006 by Shinsei Finance II (Cayman) Limited, and it limits the exemption to stabilising action taken within 30 days from the date of issue, and only when the stabilising counterparties meet defined criteria.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the formal name of the Regulations and states that they came into operation on 23 March 2006. This matters for practitioners because the exemption is time-bound and applies only once the Regulations are in force.
Section 2 (Definitions) is central to understanding the scope. It defines three key terms:
- “Preference Shares” are defined very specifically as the US$ Non-Cumulative Perpetual Preferred Securities issued in March 2006 by Shinsei Finance II (Cayman) Limited, with a principal amount of up to US$1,000,000,000. This definition is not generic; it ties the exemption to a particular issuance.
- “securities” adopts the meaning in section 239(1) of the SFA, ensuring consistency with the Act’s broader regulatory taxonomy.
- “stabilising action” is defined as an action taken in Singapore or elsewhere by Morgan Stanley & Co. International Limited (or any of its related corporations) to buy, or offer or agree to buy, any of the Preference Shares in order to stabilise or maintain the market price of the Preference Shares in Singapore or elsewhere.
For legal analysis, the definition of “stabilising action” is particularly important because it identifies both (i) the actor (Morgan Stanley & Co. International Limited and related corporations) and (ii) the purpose (stabilising or maintaining market price). It also clarifies that stabilisation can occur in Singapore or elsewhere, reflecting the cross-border nature of many issuance and trading arrangements.
Section 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the SFA shall not apply to any stabilising action taken in respect of any of the Preference Shares, 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; or
- (c) a person who acquires the Preference Shares as principal, where 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.
In practical terms, Section 3 creates a “safe harbour” from the prohibitions in sections 197 and 198, but only for stabilising action that meets all conditions: (1) it relates to the defined Preference Shares; (2) it is taken within the 30-day window from issue; (3) it is carried out by the stabilising agent captured by the definition; and (4) the counterparty falls within one of the specified categories, including a minimum consideration threshold for principal acquisitions.
Although the extract does not reproduce sections 197 and 198 themselves, the structure indicates that those provisions are the market conduct restrictions that would otherwise apply to dealings. The exemption therefore functions as a targeted carve-out, allowing stabilisation trades that might otherwise be characterised as prohibited conduct.
How Is This Legislation Structured?
The Regulations are short and consist of three substantive parts:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that determine the scope of the exemption—particularly the identity of the Preference Shares and the stabilising agent.
- Section 3 contains the exemption from specified SFA provisions, including the 30-day limit and the counterparty conditions.
From a practitioner’s perspective, the Regulations should be read alongside the SFA provisions referenced (sections 197, 198, 239(1), 275(2), and 337(1)). The subsidiary legislation operates as a narrow overlay: it does not replace the SFA, but it modifies the application of certain SFA prohibitions for a defined stabilisation scenario.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action in respect of the specified Preference Shares. While the exemption is framed in terms of “any stabilising action,” the definition of stabilising action limits the relevant conduct to actions taken by Morgan Stanley & Co. International Limited or its related corporations. Accordingly, the primary regulated party in practice is the stabilising agent (and its corporate group) conducting stabilisation activities.
However, the exemption also depends on the counterparty to the stabilising trades. Section 3 requires that the stabilising action be taken with an institutional investor, a relevant person, or a principal acquirer meeting the $200,000 minimum consideration threshold per transaction. Therefore, the Regulations indirectly affect how stabilisation trades are structured and who can be on the other side of those trades.
Why Is This Legislation Important?
This Regulations instrument is important because it balances two competing regulatory objectives: (1) maintaining market integrity through prohibitions on certain market conduct, and (2) allowing legitimate stabilisation practices in connection with securities issuance. Stabilisation can be commercially necessary in certain offerings, but it also carries a risk of price distortion if not properly bounded. By limiting the exemption to a defined security, a defined stabilising agent, and a short post-issuance period, the Regulations aim to confine stabilisation to its intended function.
For practitioners, the key value lies in the precision of the exemption. The Regulations do not offer a broad permission to stabilise any security. Instead, they provide a conditional carve-out that must be matched to the transaction documentation and trading counterparties. Lawyers advising issuers, underwriters, or stabilising agents should therefore verify:
- that the securities being dealt with fall within the definition of “Preference Shares” (including issuer, instrument type, currency, and issuance timing);
- that stabilising action occurs within the 30-day window from the date of issue;
- that the stabilising agent is the entity captured by the definition (Morgan Stanley & Co. International Limited or related corporations); and
- that each stabilisation trade is with a counterparty category permitted by Section 3, including compliance with the $200,000 minimum consideration threshold for principal acquisitions.
From an enforcement perspective, the exemption’s conditional nature means that non-compliant stabilisation could expose parties to regulatory action under the underlying SFA prohibitions. The Regulations therefore function as both a facilitative mechanism (enabling stabilisation) and a compliance benchmark (defining when stabilisation is legally protected).
Related Legislation
- Securities and Futures Act (Chapter 289) — including sections 197, 198, 239(1), 275(2), and 337(1)
- Futures Act (as referenced in the legislation metadata)
- Stabilising Act (as referenced in the legislation metadata)
- Timeline (legislation 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. 4) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.