Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) Regulations 2006
- Act Code: SFA2001-S117-2006
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289), specifically section 337(1)
- Citation: SL 117/2006
- Commencement: 27 February 2006
- Status: Current version (as at 27 Mar 2026)
- Key Provisions: Section 2 (Definitions); Section 3 (Exemption)
What Is This Legislation About?
The Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) Regulations 2006 (“Stabilising Exemption Regulations”) create a targeted regulatory carve-out from certain market conduct rules in the Securities and Futures Act (the “SFA”). In plain language, the Regulations allow specified “stabilising action” to be taken in relation to a particular class of preference shares without triggering the prohibitions that would otherwise apply.
Stabilisation is a common market practice in securities offerings. When new securities are issued, market prices may fluctuate sharply due to initial supply and demand dynamics. Stabilising action is intended to support or maintain orderly trading conditions—typically by enabling certain market participants to buy (or offer to buy) securities for a limited time after issuance. However, stabilisation can overlap with conduct that market regulators seek to deter, such as manipulative trading or misleading price formation. The Regulations therefore balance market functioning with investor protection by limiting the exemption to tightly defined circumstances.
Importantly, this is not a general stabilisation framework for all securities. The Regulations are narrowly drafted around a specific issuance: “US$ Step-Up Non-Cumulative Perpetual Preferred Securities” issued in February 2006 by Shinsei Finance (Cayman) Limited, and stabilising action taken by Morgan Stanley & Co. International Limited (or its related corporations). The exemption applies only within a defined time window and only for specified categories of counterparties and minimum consideration thresholds.
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 27 February 2006. For practitioners, this matters when assessing whether any stabilising trades were conducted during the permitted period and under the correct regulatory instrument.
Section 2 (Definitions) is central because the exemption depends entirely on whether the conduct and the securities fall within the defined terms. Three definitions are particularly important:
- “Preference Shares” are defined with precision: they are the “US$ Step-Up Non-Cumulative Perpetual Preferred Securities” issued in February 2006 by Shinsei Finance (Cayman) Limited, with a principal amount of up to US$1,000,000,000. This definition is issuance-specific and therefore limits the exemption to that exact security.
- “securities” adopts the meaning in section 239(1) of the SFA, ensuring that the exemption operates within the SFA’s broader securities framework.
- “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 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. This definition is both person-specific (Morgan Stanley and related corporations) and purpose-specific (stabilisation/price maintenance).
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 the Preference Shares within 30 days from the date of issue of the Preference Shares, provided that 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, but only if 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.
From a compliance perspective, Section 3 imposes a structured set of conditions. The exemption is not automatic merely because stabilising action is taken. The stabilising action must (i) relate to the defined Preference Shares, (ii) be taken by the defined stabiliser (Morgan Stanley or related corporations), (iii) occur within the 30-day post-issue window, and (iv) be conducted with eligible counterparties under the institutional/relevant-person categories or, for principal acquisitions, meet the minimum consideration threshold.
Practitioners should also note the drafting technique: the exemption is expressed as a “disapplication” of SFA provisions (Sections 197 and 198). This means that, for qualifying stabilising action, the prohibitions or restrictions contained in those SFA sections do not apply. However, the Regulations do not necessarily immunise all other regulatory requirements. For example, other market conduct rules, disclosure obligations, licensing requirements, and general prohibitions may still apply depending on the facts and the broader legal framework.
How Is This Legislation Structured?
The Regulations are short and consist of a straightforward structure:
- Section 1 sets out the citation and commencement.
- Section 2 provides definitions that determine the scope of the exemption.
- Section 3 contains the exemption from specified SFA provisions, including the time limit, counterparty categories, and a minimum consideration threshold for principal acquisitions.
There are no additional parts or schedules in the extract provided. The Regulations are therefore best understood as a targeted instrument: a narrow exemption tailored to a particular issuance and stabilisation participant, rather than a comprehensive stabilisation regime.
Who Does This Legislation Apply To?
Although the Regulations are made under the SFA and are therefore part of Singapore’s market conduct regulatory framework, their practical application is limited to parties involved in the relevant stabilising activity. The definition of “stabilising action” restricts the relevant conduct to actions taken by Morgan Stanley & Co. International Limited or its related corporations. As a result, the exemption is primarily relevant to that stabiliser and its corporate group.
However, the exemption also depends on the counterparty to the stabilising trades. Section 3 requires that stabilising action be taken with (i) an institutional investor, (ii) a relevant person under section 275(2) of the SFA, or (iii) a principal acquirer meeting the $200,000 minimum consideration threshold per transaction. Accordingly, the Regulations indirectly affect how counterparties are selected and how transaction terms are structured during the 30-day stabilisation window.
Why Is This Legislation Important?
This Regulations matters because it clarifies when stabilisation conduct—potentially capable of being characterised as market manipulation—can be undertaken lawfully without contravening specific SFA market conduct provisions. For issuers, arrangers, and trading desks, the exemption provides legal certainty for stabilisation activities that are often required (or at least commercially expected) in certain offerings.
From an enforcement and compliance standpoint, the Regulations show how Singapore’s approach to market integrity can accommodate legitimate market-making and stabilisation practices, but only within carefully bounded parameters. The time limit (30 days from issue), the person-specific stabiliser definition, the issuance-specific definition of the Preference Shares, and the counterparty/consideration conditions collectively reduce the risk that the exemption could be used as a broad loophole for improper trading.
For practitioners advising on offering documentation, trading policies, and regulatory compliance, the key practical impact is that stabilising trades must be mapped to the exemption conditions. This typically requires robust internal controls and evidence: confirming the identity of the stabiliser, verifying that the securities match the defined Preference Shares, tracking the date of issue and ensuring trades fall within the 30-day window, and documenting the counterparty category and transaction consideration (including whether consideration is paid in cash or via exchange of securities or other assets).
Related Legislation
- Securities and Futures Act (Cap. 289) — in particular:
- Sections 197 and 198 (disapplied by the exemption)
- Section 337(1) (power to make these Regulations)
- Section 275(2) (definition of “relevant person”)
- Section 239(1) (definition of “securities”)
- Futures Act (listed in the legislation metadata as related)
- Stabilising Act (listed in the legislation metadata as related)
- Timeline (legislation timeline reference in the metadata)
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) Regulations 2006 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.