Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) Regulations 2007
- Act Code: SFA2001-S11-2007
- Type: Subsidiary Legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting power: Section 337(1) of the Securities and Futures Act
- Commencement: 12 January 2007
- Regulation number: SL 11/2007
- Status: Current version (as at 27 March 2026)
- Key provisions (from extract): 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 2007 (“Stabilising Exemption Regulations”) create a targeted exemption from certain market conduct restrictions in the Securities and Futures Act. In plain language, the Regulations allow a stabilising manager (and, in limited circumstances, dealers acting for that manager) to take “stabilising action” in connection with a specific class of preference shares, without breaching specified statutory prohibitions—provided strict conditions are met.
Stabilising action is a common feature of securities offerings. When a new issue begins trading, the market price may be volatile. A stabilising manager may buy (or offer to buy) shares to help maintain an orderly market and reduce price dislocation. However, because stabilisation can also be misused to create an artificial price, the law imposes guardrails: limits on size, timing, disclosure, and conduct.
These Regulations are not a general stabilisation regime for all securities. They are an exemption tailored to stabilising action in respect of “relevant preference shares” (defined in the Regulations as MUFG-issued Euro and Sterling preference shares from January 2007). The exemption is therefore best understood as a bespoke regulatory permission for a particular offering and listing context, rather than a template for future transactions.
What Are the Key Provisions?
1. The exemption from specified Securities and Futures Act provisions (Regulation 3(1)). The core legal effect is in Regulation 3(1): Sections 197, 198, 218(2) and 219(2) of the Securities and Futures Act do not apply to stabilising action taken in respect of the relevant preference shares, if the stabilising action is undertaken by the stabilising manager (Mitsubishi UFJ Securities International plc) or by a dealer on behalf of that stabilising manager, and if the conditions in Regulations 3(3) to (14) are complied with.
For practitioners, this means the exemption is conditional and procedural. Even if the transaction involves stabilisation, the statutory prohibitions remain applicable unless each condition is satisfied. The exemption is also limited to stabilising action “in respect of the relevant preference shares described in paragraph (2).”
2. Eligibility thresholds and transaction scope (Regulation 3(2)). Regulation 3(2) sets out when stabilising action qualifies for the exemption. The stabilising action must be in respect of an offer of the relevant preference shares where multiple requirements are satisfied, including:
- Minimum offer value: the total value of the relevant preference shares being offered (based on the offer price) must be not less than $25 million (or equivalent in foreign currency).
- Cap on stabilising purchases: the stabilising manager’s purchases must not exceed 20% of the total number of relevant preference shares being offered prior to any over-allotment (if applicable).
- Offer document disclosure: the offer document must state (i) that stabilising action may be taken, (ii) the maximum period during which it may be taken, (iii) the over-allotment option details if applicable, and (iv) the maximum number of shares the stabilising manager may buy (capped by the 20% limit).
- Public announcement after closing date: a public announcement must be made through the relevant securities exchange on the business day immediately following the closing date, repeating the key stabilisation disclosures (including the maximum period and maximum number of shares).
- Cash terms at a specific price: the offer must be on cash terms and at a specific price payable in any currency.
3. Conduct standards: “not false or misleading” and timing restrictions (Regulations 3(3)–(5)). The Regulations impose substantive and temporal safeguards. The stabilising manager must:
- Reasonable satisfaction before and during stabilisation (Regulation 3(3)): the stabilising manager must take stabilising action only after being reasonably satisfied that the price is not false or misleading; and must continue only if reasonably satisfied that the price has not become false or misleading (other than by reason of stabilising action).
- Start date restriction (Regulation 3(4)): no stabilising action may be taken before the date of the earliest public announcement of the offer that states the offer price, made through the relevant exchange.
- End date restriction (Regulation 3(5)): stabilising action must stop on the earlier of (a) expiry of 30 calendar days from commencement of trading, or 60 calendar days from the date of the earliest public announcement stating the offer price; or (b) the date the stabilising manager has bought the maximum number of shares it is permitted to buy under the offer document.
4. Trading restrictions and permitted exceptions (Regulations 3(6)–(7)). To prevent stabilisation from turning into broader market manipulation, Regulation 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 commencement of each stabilising action or during the permitted stabilisation period.
However, Regulation 3(7) provides a narrow carve-out. It does not prohibit:
- the stabilising manager; or
- an associate of the stabilising manager, in the associate’s capacity as a dealer,
from executing sell orders for persons who are not associates of the issuer, or from selling the relevant preference shares on behalf of the issuer as part of the offer (including pursuant to underwriting commitments). This reflects the policy that stabilisation should not be used to create artificial selling pressure, while still allowing ordinary offer-related mechanics and third-party execution.
5. Record-keeping (Regulation 3(8) and beyond). The extract shows that the stabilising manager must keep a register in the form required by the listing exchange and record particulars of each stabilising purchase transaction, including price, quantity, and dealer name, before the end of the day of the transaction. While the remainder of Regulation 3 is truncated in the extract you provided, the visible portion indicates a compliance architecture: disclosure + trading limits + contemporaneous records.
Practical note: Because the exemption is conditional on compliance with paragraphs (3) to (14), a practitioner should obtain the full text of Regulation 3 (including the missing paragraphs) and verify every operational requirement—particularly around reporting, register retention, and any additional restrictions on offers to buy, price limits, or disclosure timing.
How Is This Legislation Structured?
The Regulations are short and structured around a standard legislative pattern for exemptions:
- Regulation 1 (Citation and commencement): establishes the short title and the date the Regulations come into operation (12 January 2007).
- Regulation 2 (Definitions): defines key terms used in the exemption, including “stabilising action,” “stabilising manager,” “relevant preference shares,” and offering-related concepts such as “offer document,” “offer price,” “closing date,” and “over-allotment.”
- Regulation 3 (Exemption): provides the substantive exemption and the conditions for its application. This is the operative provision and contains the eligibility criteria, conduct requirements, timing limits, trading restrictions, and compliance mechanisms.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action taken in relation to the defined “relevant preference shares” (the MUFG Euro and Sterling preference shares issued in January 2007) in connection with an offer for subscription or purchase that is made alongside listing on a securities exchange. The exemption is directed primarily at the stabilising manager—defined as Mitsubishi UFJ Securities International plc and its related corporations.
In addition, the exemption extends to dealers who act on behalf of the stabilising manager. The definition of “dealer” is broad and includes persons licensed or regulated in foreign jurisdictions for dealing in securities. This is important for cross-border offerings, where stabilising activities may be executed through multiple market participants.
Why Is This Legislation Important?
For market participants, the Regulations provide legal certainty for stabilisation activities that would otherwise risk breaching market conduct prohibitions under the Securities and Futures Act. Without an exemption, stabilising purchases or offers to buy could be characterised as prohibited conduct, exposing the stabilising manager and relevant dealers to regulatory action and potential civil consequences.
At the same time, the Regulations reflect the regulator’s concern that stabilisation can be abused. The conditions—minimum offer size, a strict cap on the percentage of shares that may be bought, mandatory disclosure in the offer document, a post-closing public announcement, and tight time windows—are designed to ensure stabilisation is transparent and limited. The “not false or misleading” standard further anchors the exemption in investor protection and market integrity.
From a practitioner’s perspective, the key value is compliance discipline. The exemption is not automatic; it is earned by meeting procedural and substantive requirements. In practice, counsel should treat the offer document and exchange announcements as compliance instruments, ensure the stabilising manager’s trading systems can enforce the sell-order restrictions and end-date triggers, and confirm that the stabilising register and transaction records meet the exchange’s prescribed form and timing.
Related Legislation
- Securities and Futures Act (Cap. 289): Sections 197, 198, 218(2) and 219(2) (the provisions from which exemption is granted)
- Futures Act: (listed in the metadata as related legislation)
- Stabilising Act: (listed in the metadata as related legislation)
- Timeline / Legislation timeline: for version control and amendment history
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 2007 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.