This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 7, Series 24, Series 55, Series 62, and Series 79):
An issuer would like to buy back shares and has already made a once-per-week block transaction this week. The inside quote for the security is 18.30 – 18.34. The last transaction was 18.32. Under SEC Rule 10b-18, which two of the following statements are true?
I. The maximum number of shares the issuer could buy in a day is 25% of the ADTV for the previous four weeks.
II. The maximum number of shares the issuer could buy in a day is 30% of the ADTV for the previous four weeks.
III. The highest price the issuer could buy at would be $18.32.IV. The highest price the issuer could buy at would be $18.34.
Answers:
A. I and III
B. II and IV
C. I and IV
D. II and III
Correct Answer: A. I and III
Rationale: Under SEC Rule 10b-18,when an issuer buys back their own shares, the bid may not be higher than the last transaction or the highest independent bid, whichever is greater. The maximum daily purchase cannot exceed 25% of the ADTV (average daily trading volume) over the previous four weeks.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.