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) (in exercise of powers under section 337(1))
- Enacting Authority: Monetary Authority of Singapore (MAS)
- Regulation Number / Citation: SL 171/2006
- Citation: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 4) Regulations 2006
- Commencement: 23 March 2006
- Key Provisions:
- Section 1: Citation and commencement
- Section 2: Definitions (including “Preference Shares” and “stabilising action”)
- Section 3: Exemption from sections 197 and 198 of the SFA for specified stabilising action
- Regulatory Status: Current version as at 27 March 2026
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 Exemption Regulations”) is a targeted regulatory instrument. It creates a narrow exemption from certain market conduct rules in the Securities and Futures Act (SFA) for a specific type of stabilising activity relating to a defined issuance of preference shares.
In plain language, the Regulations recognise that, in some capital markets transactions, market makers or arrangers may take limited steps to support or stabilise the trading price of newly issued securities shortly after issuance. Such actions can reduce volatility and help ensure orderly trading. However, stabilising conduct can overlap with prohibitions against market manipulation or improper trading practices. This Regulations therefore carves out a controlled exception—so long as the stabilising action meets strict conditions.
Importantly, the exemption is not general. It applies only to “Preference Shares” that are specifically identified in the Regulations (the US$ Non-Cumulative Perpetual Preferred Securities issued in March 2006 by Shinsei Finance II (Cayman) Limited) and only to stabilising actions taken by a specified firm (Morgan Stanley & Co. International Limited and its related corporations). The exemption also applies only within a defined time window from the date of issue and only for certain categories of counterparties.
What Are the Key Provisions?
Section 1 (Citation and commencement) provides the legal identity of the Regulations and states that they come into operation on 23 March 2006. For practitioners, this matters when assessing whether a particular stabilising trade falls within the regulatory framework.
Section 2 (Definitions) is central because it determines the scope of the exemption. The Regulations define:
- “Preference Shares” 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.
- “securities” by reference to the SFA definition in section 239(1).
- “stabilising action” as an action taken in Singapore or elsewhere by Morgan Stanley & Co. International Limited (or any of its related corporations) to buy, or to 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.
From a compliance perspective, the definition is both actor-specific and purpose-specific. The exemption is limited to stabilising actions by the named entity (and its related corporations), and the conduct must be undertaken to stabilise or maintain the market price. This is significant because market conduct exemptions often hinge on whether the conduct is genuinely stabilising (and documented as such) rather than trading for other commercial reasons.
Section 3 (Exemption) is the operative provision. It states that sections 197 and 198 of the SFA shall not apply to 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 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.
Practically, Section 3 does two things at once:
- It removes the application of specified SFA market conduct provisions (sections 197 and 198) to the relevant stabilising actions; and
- It conditions that removal on (i) the time period (30 days from issue), (ii) the security (the defined Preference Shares), (iii) the stabilising actor (as defined in Section 2), and (iv) the counterparty category and minimum consideration threshold (for principal acquisitions).
For lawyers advising issuers, arrangers, or dealing firms, the counterparty conditions are often where compliance risk concentrates. The Regulations require that stabilising trades be conducted with institutional investors, relevant persons, or qualifying principal acquirers meeting the $200,000 minimum consideration threshold per transaction. This means that trade documentation, onboarding records, and transaction-level evidence of consideration are likely to be critical.
How Is This Legislation Structured?
The Regulations are structured in a simple, three-section format:
- Section 1 sets out the citation and commencement date.
- Section 2 provides definitions that delimit the scope of the exemption, including the specific “Preference Shares” and the defined “stabilising action” by a specified stabiliser.
- Section 3 contains the exemption itself, specifying the SFA provisions excluded (sections 197 and 198), the time window (30 days from issue), and the permitted counterparty categories and consideration threshold.
There are no additional Parts or complex schedules in the extract provided. The Regulations operate as a targeted carve-out rather than a comprehensive market conduct code.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA and relate to “market conduct”, their practical application is narrower than the SFA itself. The exemption is relevant primarily to:
- Morgan Stanley & Co. International Limited and its related corporations (because “stabilising action” is defined by reference to their actions);
- Any parties transacting with the stabiliser in the context of stabilising the defined Preference Shares; and
- Dealers and counterparties who may be involved in trades or arrangements within the 30-day post-issuance period.
The Regulations also indirectly affect issuers and arrangers because the exemption is tied to a specific issuance by Shinsei Finance II (Cayman) Limited. However, the exemption is drafted to regulate the legal consequences of stabilising trades under the SFA. Accordingly, advisers should treat it as a compliance framework for the stabilising programme rather than a general permission for any market participant to stabilise any security.
Why Is This Legislation Important?
Stabilising actions sit at the intersection of legitimate market support and prohibited market manipulation. Without an exemption, stabilising conduct could be argued to fall within the ambit of market conduct restrictions in the SFA. The Regulations therefore provide legal certainty: they clarify that, for a defined transaction and under defined conditions, certain SFA provisions will not apply.
For practitioners, the significance lies in the precision of the carve-out. The exemption is limited by:
- Security identity (the specific Preference Shares issued in March 2006);
- Stabiliser identity (Morgan Stanley & Co. International Limited and related corporations);
- Time (within 30 days from the date of issue); and
- Counterparty categories and thresholds (institutional investors, relevant persons, or principal acquirers meeting the $200,000 minimum consideration per transaction).
From an enforcement and risk-management perspective, these limitations mean that compliance failures are likely to be assessed transaction-by-transaction. If stabilising trades are executed outside the 30-day window, with non-qualifying counterparties, or in a manner inconsistent with the defined purpose of stabilisation, the exemption would not apply and the underlying SFA market conduct provisions could potentially be engaged.
Finally, the Regulations illustrate how Singapore’s market conduct regime uses bespoke subsidiary legislation to accommodate structured capital markets practices. Rather than leaving stabilisation to broad discretion, MAS authorises specific exemptions through regulations that can be tailored to particular issuances and market participants.
Related Legislation
- Securities and Futures Act (SFA) (Cap. 289) — in particular:
- Section 197 and Section 198 (market conduct provisions from which the exemption applies)
- Section 337(1) (power to make these Regulations)
- Section 275(2) (definition of “relevant person”)
- Section 239(1) (definition of “securities”)
- 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.