Rule 10b-18

AAA

DEFINITION of 'Rule 10b-18'

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 'Rule 10b-18'

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. Securities And Exchange Commission ...

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

    A person or firm in the business of buying and selling securities, ...
  3. 10-K

    A comprehensive summary report of a company's performance that ...
  4. Buyback

    The repurchase of outstanding shares (repurchase) by a company ...
  5. Agent

    1. An individual or firm that places securities transactions ...
  6. SEC Form 10-Q

    A comprehensive report of a company's performance that must be ...
RELATED FAQS
  1. What happens when a company buys back its shares?

    When a company performs a share buyback, there are a few things that the company can do with the securities they buy back. ... Read Full Answer >>
  2. How does an underwriter syndicate work together on an initial public offering (IPO)?

    An underwriting syndicate is a group of investment banks that share the responsibility of marketing the shares of a company ... Read Full Answer >>
  3. What is the difference between the Sarbanes-Oxley Act and the Dodd-Frank Act?

    The Sarbanes-Oxley Act (SOX) was enacted to protect investors from potential fraudulent accounting by companies, whereas ... Read Full Answer >>
  4. How often should I measure my company's key performance metrics (KPIs)?

    Insider trading is a trade made with material and nonpublic information. Insider trading undermines the integrity of security ... Read Full Answer >>
  5. What sectors are best for an investor seeking a high annual return?

    A company receives a share premium whenever it receives money in excess of the face value (par value) of its shares. Corporations ... Read Full Answer >>
  6. If I write a blog post about stocks I own, is that considered insider trading?

    Writing a blog post about stocks you own is not considered insider trading. The only duty of the blogger is to disclose he ... Read Full Answer >>
Related Articles
  1. Investing

    A Breakdown Of Stock Buybacks

    Find out what these company programs achieve and what it means for stockholders.
  2. Brokers

    Tips For When To Buy, Sell Or Hold

    Knowing how to make sound snap decisions is a must for any broker.
  3. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  4. Investing News

    New Avenues For Bitcoin Funding Opened Up By SEC

    Could New SEC Regulations Pave the Way for Investing in Bitcoin Startups?
  5. Economics

    What Happens When A Stock Broker Goes Bust?

    While there is nothing much that can be done against the market volatility, there is a protection mechanism in place in case the broker firm runs into a financial trouble.
  6. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  7. Economics

    Explaining the Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business.
  8. Investing

    Who's Banning Facebook Now?

    Facebook may have over one billion monthly users, but there are many countries, including China, where the social media giant is banned.
  9. Investing

    Why Facebook is Banned in China

    Tight controls imposed by China have resulted in the ban of several foreign social media sites, like Facebook, but how did this come about?
  10. Options & Futures

    SEC-Regulated Options Brokers

    Investopedia provides a List Of SEC-Regulated Options Brokers

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center