Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 5) Regulations 2006
- Act Code: SFA2001-S670-2006
- Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting authority: Monetary Authority of Singapore (MAS)
- Power relied on: Section 337(1) of the Securities and Futures Act
- Commencement: 13 December 2006
- Key provisions:
- Section 1: Citation and commencement
- Section 2: Definitions
- Section 3: Exemption for stabilising action (including conditions and limits)
- Regulatory status (as provided): Current version as at 27 March 2026
- Primary legal effect: Disapplies Sections 197 and 198 of the Securities and Futures Act for specified stabilising actions relating to specified preference shares, subject to detailed conditions
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) (No. 5) Regulations 2006 (“Stabilising Action (No. 5) Regulations”) creates a targeted regulatory exemption. In essence, it allows a stabilising manager (and certain dealers acting on its behalf) to take limited steps to support the market price of particular preference shares during a defined period, without breaching Singapore’s general market conduct prohibitions.
Singapore’s market conduct framework in the Securities and Futures Act (the “SFA”) is designed to prevent manipulative or misleading trading practices. Sections 197 and 198 (as referenced in these Regulations) generally restrict conduct that could distort price formation or mislead investors. However, stabilisation is a recognised market practice in certain capital markets transactions—particularly in the context of new listings—where a stabilising manager may buy securities to reduce volatility and support orderly trading.
This legislation is therefore a “permission with guardrails”. It does not authorise stabilisation in general. Instead, it permits stabilising action only for a specific set of instruments (the “Dollar Preference Shares” and “Sterling Preference Shares”) issued in December 2006 by specified issuers, and only when the transaction and stabilisation activities meet strict quantitative limits, disclosure requirements, timing restrictions, and record-keeping obligations.
What Are the Key Provisions?
1. The exemption mechanism (Section 3(1))
Section 3(1) provides that Sections 197 and 198 of the SFA shall not apply to stabilising action taken in respect of the “relevant preference shares” described in Section 3(2). The exemption applies only where the stabilising action is undertaken by the “stabilising manager” (identified in the definitions as Goldman Sachs International) or by a “dealer” acting on behalf of that stabilising manager, and only if all conditions in paragraphs (3) to (14) are satisfied.
2. Scope: the specific securities and the specific transaction (Section 3(2))
The exemption is transaction-specific and instrument-specific. The “relevant preference shares” are either the “Dollar Preference Shares” (fixed to floating rate non-cumulative perpetual preferred securities issued by SMFG Preferred Capital USD 1 Limited, up to US$3,000,000,000) or the “Sterling Preference Shares” (issued by SMFG Preferred Capital GBP 1 Limited, up to £1,500,000,000). This means the exemption is not a general stabilisation licence for any preference shares; it is tied to the December 2006 issuance.
Section 3(2) sets out multiple cumulative conditions. Key ones include:
- Minimum offer size: the total value of the relevant preference shares being offered (based on the offer price) must be at least $25 million (or equivalent).
- Cap on stabilising purchases: the stabilising manager’s total nominal value purchases for stabilisation must not exceed 20% of the total nominal value of the relevant preference shares being offered prior to any over-allotment (if applicable).
- Disclosure in the offer document: the offer document must state that stabilising action may be taken, the maximum stabilisation period, the over-allotment option details (if applicable), and the maximum nominal value the stabilising manager may buy (not exceeding the 20% cap).
- Exchange announcement after closing: a public announcement must be made through the relevant securities exchange on the business day immediately following the “closing date” (defined as the date of issue of the relevant preference shares), again containing the same core stabilisation disclosures.
- Cash terms and fixed price: the offer must be on cash terms and made at a specific price payable in any currency.
3. “Reasonably satisfied” price integrity duties (Section 3(3))
Even with the exemption, the stabilising manager is not free to stabilise regardless of market information. Under Section 3(3), the stabilising manager must:
- Before starting: take stabilising action only after being reasonably satisfied that the price of the relevant preference shares is not false or misleading.
- During stabilisation: continue only after being reasonably satisfied that the price has not become false or misleading, except where the only reason is the stabilising action itself.
This is an important investor-protection safeguard. It links the exemption to ongoing compliance with truthful price formation and prevents stabilisation from being used to mask misinformation or improper pricing.
4. Timing restrictions (Sections 3(4) and 3(5))
The Regulations impose strict start and end points:
- No stabilisation before the offer price is publicly announced: Section 3(4) prohibits stabilising action before the date of the earliest public announcement of the offer price made through the relevant exchange.
- Hard stop dates: Section 3(5) prohibits stabilising action after the earlier of:
- the expiry of 30 calendar days from the date of commencement of trading on the exchange; or
- the expiry of 60 calendar days from the date of the earliest public announcement of the offer price; or
- the date on which the stabilising manager has bought the maximum nominal value it is permitted to buy under the offer document.
5. Trading conduct limits: sell-order prohibition with narrow exceptions (Sections 3(6) and 3(7))
Section 3(6) generally prohibits the stabilising manager from effecting (or causing to be effected) any sell order of the relevant preference shares prior to the date of each stabilising action or during the permitted stabilisation period. This reduces the risk that stabilisation could be combined with selling pressure to create artificial price movements.
However, Section 3(7) provides narrow carve-outs. It does not prohibit:
- the stabilising manager, or
- an associate of the stabilising manager (acting in the associate’s capacity as a dealer),
- from executing sell orders for persons who are
- not
- associates of the issuer, or selling on behalf of the issuer as part of the offer (including under underwriting commitments). These exceptions preserve legitimate client trading and underwriting mechanics while still constraining stabilisation-specific conduct.
6. Record-keeping and exchange-facing transparency (Section 3(8) and beyond)
The extract provided truncates after Section 3(8), but it clearly indicates that the stabilising manager must keep a register in the form required by the listing exchange and record particulars of each stabilisation-related purchase transaction (including price, and likely other details such as date/time and quantity). In practice, these record-keeping provisions are central to enforcement: they enable MAS and the exchange to verify that stabilisation stayed within the permitted limits and timing windows.
For practitioners, the key point is that the exemption is conditional not only on what the stabilising manager does, but also on the ability to evidence compliance through contemporaneous records and required disclosures.
How Is This Legislation Structured?
The Regulations are short and structured around three core provisions:
- Section 1 (Citation and commencement): identifies the instrument and sets the commencement date (13 December 2006).
- Section 2 (Definitions): defines the transaction and parties, including “closing date”, “dealer”, the two classes of preference shares, “offer” and “offer document”, “offer price”, “over-allotment”, and the stabilisation concepts (“stabilising action” and “stabilising manager”).
- Section 3 (Exemption): contains the operative exemption and the detailed conditions (paragraphs (1) to (14), with the extract showing (1) to (8) and part of (8)).
In effect, Section 3 is the entire compliance framework: it specifies the legal “switch” (disapplication of SFA market conduct provisions) and then enumerates the conditions that must be satisfied for the switch to operate.
Who Does This Legislation Apply To?
The Regulations apply to:
- Goldman Sachs International (as the “stabilising manager”), and
- dealers acting on behalf of the stabilising manager (including certain foreign-regulated entities that fall within the definition of “dealer”).
They apply only in relation to stabilising action taken in respect of the specified relevant preference shares (the Dollar and Sterling preference shares issued in December 2006 by the named issuers) in connection with an offer for subscription or purchase that is linked to the listing of those preference shares on a securities exchange.
For issuers and their advisers, the Regulations indirectly matter because the stabilising manager’s ability to rely on the exemption depends on what the issuer includes in the offer document and what is announced through the securities exchange after the closing date. Thus, while the exemption is framed as a stabilising manager/dealer compliance regime, issuers must ensure their disclosure package supports the stabilisation plan.
Why Is This Legislation Important?
These Regulations are important because they operationalise a balance between two competing regulatory goals: (i) preventing market manipulation and misleading price formation, and (ii) allowing stabilisation to support orderly trading in new issues. Without an exemption, stabilising purchases could fall within the prohibitions in the SFA, creating legal uncertainty for underwriting syndicates and stabilising managers.
From a practitioner’s perspective, the most significant value of the Regulations lies in their precision. The exemption is conditional on meeting defined thresholds (e.g., the $25 million minimum offer value and the 20% cap on stabilising purchases), strict timing rules (no stabilisation before the offer price is publicly announced; cessation by specified calendar-day limits or when the maximum purchase quantity is reached), and ongoing “reasonably satisfied” duties regarding whether the price is false or misleading.
In enforcement terms, the disclosure and record-keeping requirements make stabilisation auditable. MAS and the exchange can assess whether stabilisation stayed within the permitted envelope. For legal teams, this means stabilisation documentation—offer document wording, exchange announcements, stabilisation registers, and internal compliance controls—must be aligned to the regulatory conditions to preserve the exemption.
Related Legislation
- Securities and Futures Act (Cap. 289) — particularly Sections 197 and 198 (market conduct prohibitions) and Section 337(1) (power to make exemptions/regulations)
- Futures Act (as referenced in the provided metadata/timeline context)
- Stabilising Act (as referenced in the provided metadata/timeline context)
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. 5) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.