Rule 10b-18

A A A

DEFINITION

An SEC rule that provides a "safe harbor" for companies and their affiliated purchasers when the company or affiliates repurchase the company's shares of common stock (i.e., they will not be deemed to have violated anti-fraud provisions of the Securities Exchange Act of 1934). The repurchases must fall within the four conditions of the rule. These cover the manner of purchase, the time of the repurchases, the prices paid and the volume of shares repurchased.

INVESTOPEDIA EXPLAINS

The rule breaks down as follows:



  • Manner of purchase: The issuer or affiliate must purchase all shares from a single broker or deal during a single day.
  • Timing: An issuer with an average trading volume less than $1 million per day or a public float value below $150 million is unable to trade within the last 30 minutes of trading. Companies with higher average-trading-volume or public float value can trade up until the last 10 minutes.
  • Price: The issuer must repurchase at a price that does not exceed the highest independent bid or the last transaction price quoted.
  • Volume: The issuer can't purchase more than 25% of the average daily volume.


The SEC also specified more detailed disclosure requirements for repurchases. In each quarterly report on Form 10-Q and in the annual report on Form 10-K, the company must provide a table showing, on a month-by-month basis: the total number of shares purchased, the average price paid per share, the total number of shares purchased under publicly announced repurchase programs, and the maximum number of shares that may be repurchased under these programs (or maximum dollar amount if the limit is stated in those terms).


RELATED TERMS
  1. Agent

    1. An individual or firm that places securities transactions for clients. 2. ...
  2. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities markets ...
  3. Broker-Dealer

    A person or firm in the business of buying and selling securities, operating ...
  4. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce ...
  5. Share Repurchase

    A program by which a company buys back its own shares from the marketplace, ...
  6. Securities Exchange Act Of 1934

    The Securities Exchange Act of 1934 was created to provide governance of securities ...
  7. 10-K

    A comprehensive summary report of a company's performance that must be submitted ...
  8. SEC Form 10-Q

    A comprehensive report of a company's performance that must be submitted quarterly ...
  9. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative by the ...
  10. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that follows the name ...
Related Articles
  1. A Breakdown Of Stock Buybacks
    Investing

    A Breakdown Of Stock Buybacks

  2. Tips For When To Buy, Sell Or Hold
    Brokers

    Tips For When To Buy, Sell Or Hold

  3. What happens when a company buys back ...
    Investing

    What happens when a company buys back ...

  4. How The SEC Places Rules On Penny Stocks
    Investing Basics

    How The SEC Places Rules On Penny Stocks

  5. When, Why And How To File A Complaint ...
    Credit & Loans

    When, Why And How To File A Complaint ...

  6. How To Invest In Corporate Spin-offs
    Chart Advisor

    How To Invest In Corporate Spin-offs

  7. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

  8. Understanding The Top SEC filing forms
    Investing Basics

    Understanding The Top SEC filing forms

  9. How A Company Files With The SEC
    Investing Basics

    How A Company Files With The SEC

  10. Day Trading Rules For Rookies: Don't ...
    Active Trading Fundamentals

    Day Trading Rules For Rookies: Don't ...

comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center