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Question (Relevant to the Series 24, Series 55, Series 62, and Series 79):
The price of a 10b-18 repurchase transaction:
Answers:
A. Must not exceed the highest independent bid or the last independent transaction price, whichever is higher
B. Must not exceed the highest independent bid or the last independent transaction price, whichever is lower
C. Must not exceed the lowest independent offer or the last independent transaction price, whichever is higher
D. Must not exceed the lowest independent offer or the last independent transaction price, whichever is lower
Correct Answer: A. Must not exceed the highest independent bid or the last independent transaction price, whichever is higher
Rationale: Rule 10b-18 provides a safe harbor for issuer repurchase transactions. It allows the issuer to repurchase its own stock without being liable for manipulation based solely on the manner, timing, price, and volume of the repurchase transactions. In order to qualify, the transaction must be at a price equal to or less than the highest independent bid and the last independent transaction price, whichever is higher. The transaction must comply with broker usage restrictions, timing restrictions, and volume limitations as well.
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