6.3.3. Issuer Buy Back Rules
Instead of conducting a self-tender, sometimes an issuer decides to buy back its own shares on the open market. The issuer will want to do so in a way that does not open it up to accusations of price manipulation. The SEC offers a safe harbor rule for issuers to follow in this situation. A purchase by an issuer of its own securities within the bounds of this safe harbor rule is sometimes known as a Rule 10b-18 purchase. The following is a reasonable summary of the four main conditions for such purchases to enjoy safe harbor as Rule 10b-18 purchases:
1. One broker-dealer per day. The issuer and its affiliates may not purchase the issuer’s securities using more than one broker-dealer on any given day.
2. Time of purchases. To qualify as a Rule 10b-18 purchase, a purchase may not:
» Be the first purchase of the trading day
or
» Take place within the last 30 minutes of trading (last 10 minutes for actively traded securities)
3. Price of purchases. To qualify as a Rule 10b-18 purchase, a purchase may not be at a higher price than the last independent purchase, or the highest current independent bid (whichever is higher).
4. Volume of purchases. On any given day, the total purchases by the issuer and its affiliates may not exceed 25% of ADTV.
SEC Rule 10b-18
Rule 10b-18 does not apply to an issuer buying back its shares in response t