Statute Details
- Title: Securities and Futures (Market Conduct) (Exemption for Stabilising Action in respect of Dealings in Preference Shares) Regulations 2009
- Act Code: SFA2001-S58-2009
- Legislation Type: Subsidiary legislation (SL)
- Authorising Act: Securities and Futures Act (Cap. 289)
- Enacting Power: Powers conferred by section 337(1) of the Securities and Futures Act
- Commencement: 20 February 2009
- Citation: SL 58/2009
- Status: Current version as at 27 March 2026 (per provided extract)
- Key Provisions (from extract): Section 1 (Citation and commencement); 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 2009 (“Stabilising Action Exemption Regulations”) create a targeted regulatory carve-out from certain market conduct rules in the Securities and Futures Act (“SFA”). In plain terms, the Regulations allow a stabilising manager (and dealers acting on its behalf) to take limited “stabilising action” in connection with a specific offer of preference shares—without breaching the prohibitions that would otherwise apply.
Stabilising action is a common capital markets practice used around the time of listing or issuance to help manage short-term price volatility. However, regulators are concerned that stabilisation can be misused to create a misleading market or to support an artificial price. Accordingly, the Regulations do not provide a blanket exemption. Instead, they impose detailed conditions on when stabilisation may occur, how much may be bought, what must be disclosed, and what records must be kept.
Although the Regulations are framed as a general legal instrument, the definition of “Preference Shares” is highly specific: it refers to non-cumulative perpetual preferred securities issued in February 2009 by Mizuho Capital Investment (USD) 2 Limited, with a principal amount up to US$3,000,000,000. This indicates the Regulations are effectively a bespoke exemption for a particular transaction, rather than a standing regime for all preference share offerings.
What Are the Key Provisions?
1. Citation, commencement, and interpretive framework. Section 1 confirms the Regulations may be cited as the 2009 Stabilising Action Exemption Regulations and that they came into operation on 20 February 2009. Section 2 then provides definitions that are crucial to applying the exemption. These include definitions of “dealer”, “issuer”, “offer”, “offer document”, “offer price”, “over-allotment”, “stabilising action”, and “stabilising manager”.
2. Who may stabilise and what counts as stabilising action. The Regulations define “stabilising manager” as Merrill Lynch Pierce, Fenner & Smith Incorporated or any of its related corporations. “Stabilising action” is defined as actions taken in Singapore or elsewhere by the stabilising manager (or a dealer on its behalf) 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 broad enough to cover not only actual purchases but also offers or agreements to buy—meaning compliance must extend to pre-trade conduct and arrangements.
3. The core exemption: what is excluded from the SFA. Section 3(1) provides the exemption. It states that sections 197, 198, 218(2), and 219(2) of the SFA shall not apply to stabilising action taken in respect of the specified offer, provided that paragraphs (3) to (14) are complied with. While the extract does not reproduce the content of those SFA sections, in practice these provisions relate to market conduct restrictions (for example, prohibitions on misleading conduct, false or misleading statements, or improper trading practices). The exemption therefore functions as a “safe harbour” from those prohibitions—conditional on strict compliance.
4. Transaction eligibility conditions (size, limits, and disclosure). Section 3(2) sets out when stabilising action may be taken for the relevant offer. The stabilising action must be in respect of an offer where all of the following are satisfied:
- Minimum offer size: the total value of the Preference Shares being offered, calculated based on the offer price, is not less than $25 million (or its equivalent in foreign currency).
- Purchase cap: the total number of Preference Shares that the stabilising manager buys to undertake stabilising action must not exceed 20% of the total number of Preference Shares being offered prior to any over-allotment (if applicable).
- Offer document disclosure: the offer document must state that stabilising action may be taken; the maximum period during which it may be taken; details of any over-allotment option; and the maximum number of Preference Shares the stabilising manager may buy (not exceeding the 20% cap).
- Public announcement disclosure: a public announcement must be made through the relevant securities exchange on the business day immediately following the closing date of the offer, containing the same categories of information (permission, maximum period, over-allotment option details, and the stabilising manager’s maximum purchase quantity).
- Cash terms and fixed price: the offer must be on cash terms and made (or to be made) at a specific price payable in any currency.
5. Price integrity and timing restrictions. Section 3(3) imposes a “reasonable satisfaction” standard. The stabilising manager must (a) take stabilising action only after being reasonably satisfied that the price is not false or misleading; and (b) continue only after being reasonably satisfied that the price has not become false or misleading, other than by reason of the stabilising action itself. This is a key compliance concept: it requires ongoing judgment and monitoring, not merely a one-time check.
Section 3(4) prohibits stabilising action before the date on which the earliest public announcement of the offer stating the offer price is made through the relevant securities exchange. Section 3(5) then sets a hard stop: stabilising action must not be taken after the earlier of (a) the expiry of 30 calendar days from the date of commencement of trading, or 60 calendar days from the date of the earliest public announcement stating the offer price (whichever is earlier); and (b) the date on which the stabilising manager has bought the maximum number of Preference Shares it is permitted to buy under the offer document.
6. Trading conduct: limits on sell orders and permitted exceptions. Section 3(6) provides that, subject to paragraph (7), the stabilising manager must not effect or cause to be effected any sell order of the Preference Shares prior to the date of commencement of each stabilising action or during the period when stabilising action is permitted. This is designed to prevent stabilisation from being combined with selling activity that could distort the market.
However, Section 3(7) creates an important exception: it does not prohibit the stabilising manager (or an associate of the stabilising manager acting in its capacity as a dealer) from (i) executing sell orders for persons who are not associates of the issuer; or (ii) selling the Preference Shares on behalf of the issuer as part of the offer, including pursuant to any underwriting commitment. For practitioners, this means compliance teams must distinguish between prohibited sell orders connected to stabilisation and permitted sell orders arising from client or issuer underwriting arrangements.
7. Record-keeping and inspection rights. Section 3(8) requires the stabilising manager to keep a register in the form required by the securities exchange and to record particulars of each stabilising transaction to buy the Preference Shares, including price, quantity, and dealer name, before the end of the day of the transaction. Section 3(9) provides that if the register is kept in Singapore, it must be made available for inspection by the Authority or the securities exchange within the time stipulated. Section 3(10) addresses registers kept outside Singapore, requiring capability to bring the register into Singapore for inspection or, if not capable, providing an alternative mechanism (the extract truncates the remainder of paragraph (10), but the intent is clear: regulators must be able to inspect promptly).
How Is This Legislation Structured?
The Regulations are structured as a short instrument with three main sections:
- Section 1 (Citation and commencement): establishes the legal identity of the Regulations and the date they came into force.
- Section 2 (Definitions): sets out the interpretive terms used in the exemption, including the transaction-specific definition of “Preference Shares” and the roles of “dealer” and “stabilising manager”.
- Section 3 (Exemption): contains the operative exemption and the detailed conditions, including eligibility criteria, disclosure requirements, timing restrictions, trading limitations, and record-keeping/inspection obligations.
Notably, the extract indicates paragraphs (3) to (14) within Section 3 contain the bulk of the compliance framework. Even though the provided text is truncated after paragraph (10), the structure signals a comprehensive set of procedural and substantive safeguards.
Who Does This Legislation Apply To?
The Regulations apply to stabilising action taken in respect of the specified offer of the defined “Preference Shares”. The exemption is available only where the stabilising action is undertaken by the stabilising manager (Merrill Lynch Pierce, Fenner & Smith Incorporated or related corporations) or by a dealer acting on behalf of the stabilising manager. The definition of “dealer” is broad and includes foreign-regulated persons, provided they are licensed/approved/authorised under their home jurisdiction to deal in securities.
In practical terms, the Regulations bind the stabilising manager and impose compliance duties that will typically be operationalised through the stabilising manager’s dealing desk, compliance monitoring, and documentation teams. Issuers and offer arrangers are not the direct subjects of the exemption, but they are indirectly affected because the offer document and public announcements must include specific stabilisation disclosures and because the offer must be structured on cash terms at a specific price.
Why Is This Legislation Important?
This legislation matters because it balances two competing objectives: enabling legitimate market stabilisation practices while protecting market integrity. Without an exemption, stabilising activity could fall within prohibitions under the SFA relating to improper market conduct. The Regulations provide a lawful pathway for stabilisation, but only within tightly controlled parameters.
For practitioners, the most significant value of the Regulations lies in their conditional safe harbour. The exemption is not automatic; it depends on meeting quantitative thresholds (minimum offer value; maximum stabilising purchases), strict disclosure obligations (offer document and exchange announcement), and operational constraints (no stabilisation before the offer price announcement; no stabilisation after the earlier of specified time limits or purchase caps). The “reasonable satisfaction” standard regarding false or misleading prices also creates a compliance burden that must be evidenced through internal processes.
Finally, the record-keeping and inspection provisions are critical for enforcement readiness. Stabilising managers must be able to produce transaction-level records promptly to the Monetary Authority of Singapore or the relevant securities exchange. This is particularly important because stabilisation often occurs across time zones and may involve trading both on and off exchange, including arrangements with associates acting as dealers.
Related Legislation
- Securities and Futures Act (Cap. 289): In particular, sections 197, 198, 218(2), and 219(2) (as referenced by the exemption)
- Futures Act: (listed in the provided metadata as related legislation)
- Stabilising Act: (listed in the provided metadata as related legislation)
- Timeline / Legislation timeline: (for version control and amendment history reference)
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 2009 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.