here are some buyback rules. after reading this, i
Post# of 17862
Posted On: 04/25/2014 8:59:25 PM
here are some buyback rules. after reading this, im not so sure it has been done yet. I know; its long. but it gave me a better understanding of what to look for. also, one article stated that just like an investor if the price is too high then the company doesnt have to go through with the buyback they intended. <br /><br /><br />Open Market Share Repurchase ProgramsWhat legal issues should a company be aware of as it designs and implements its repurchase program?Avoiding fraudulent and manipulative practicesSections 9(a) and 10(b) of the Securities Exchange Act of 1934 (the Exchange Act) prohibit fraudulent and manipulative practices in connection with an issuer’s or “affiliated purchaser’s” purchase and sale of the issuer’s securities.Rule 10b-18 provides a non-exclusive safe harbor against allegations of market manipulation under Sections 9(a)(2) and 10(b) of the Exchange Act and Rule 10b-5 under the Exchange Act solely by reason of the manner, timing, price and volume of the repurchases when the company’s repurchases are made in accordance with the conditions set forth in the rule. Rule 10b-18, however, does not protect against other types of violations of the Exchange Act and Rule 10b-5, such as violations arising from purchases made by an issuer on the basis of material non-public information.In order to come under Rule 10b-18’s safe harbor, a company and its affiliated purchasers, taken together, must meet all the following conditions:1. Manner: all of the bids and purchases must be made through only one broker or dealer on any single day;2. Timing: the purchases must not
a) constitute the opening transaction,(b) for a security that, during the preceding four weeks, has an average daily trading volume (ADTV) value of at least $1 million and a public float value of at least $150 million, be made during the 10 minutes before the scheduled close of the primary trading session in the security’s principal market, and during the 10 minutes before the scheduled close of the primary trading session in the market where the purchase is made, and(c) for all other securities, be made during the 30 minutes before the scheduled close of the primary trading session in the security’s principal market, and the 30 minutes before the scheduled close of the primary trading session in the market where the purchase is made;3. Volume: the aggregate purchases on any given day must not exceed 25 percent of the purchased security’s ADTV. “Block” trades typically will be included in computing a security’s ADTV. However, once per week, “in lieu of purchasing under the 25 percent of ADTV limit for that day,” a company or its affiliated purchasers may make one block trade of its shares without regard to the volume limit, provided that it does not make any other Rule 10b-18 purchases on the same day. Purchases made pursuant to this block trade exception will not be included in computing a security’s ADTV for purposes of Rule 10b-18 volume limits; and4. Price: the purchases must not be made at a price that exceeds the highest independent bid or the last independent transaction price (whichever is higher) quoted or reported in the consolidated system at the time the purchase is made.The safe harbor applies on a daily basis, and a failure to meet any one of the four conditions will remove all of a company’s repurchases from the safe harbor for the day.Generally, companies attempt to comply with Rule 10b-18. Companies typically enter into an arrangement with a broker or dealer that agrees to implement the repurchase program according to the companies’ instructions and in accordance with the requirements of Rule 10b-18. All of the major brokerage firms understand the Rule 10b-18 requirements and implement programs accordingly.
a) constitute the opening transaction,(b) for a security that, during the preceding four weeks, has an average daily trading volume (ADTV) value of at least $1 million and a public float value of at least $150 million, be made during the 10 minutes before the scheduled close of the primary trading session in the security’s principal market, and during the 10 minutes before the scheduled close of the primary trading session in the market where the purchase is made, and(c) for all other securities, be made during the 30 minutes before the scheduled close of the primary trading session in the security’s principal market, and the 30 minutes before the scheduled close of the primary trading session in the market where the purchase is made;3. Volume: the aggregate purchases on any given day must not exceed 25 percent of the purchased security’s ADTV. “Block” trades typically will be included in computing a security’s ADTV. However, once per week, “in lieu of purchasing under the 25 percent of ADTV limit for that day,” a company or its affiliated purchasers may make one block trade of its shares without regard to the volume limit, provided that it does not make any other Rule 10b-18 purchases on the same day. Purchases made pursuant to this block trade exception will not be included in computing a security’s ADTV for purposes of Rule 10b-18 volume limits; and4. Price: the purchases must not be made at a price that exceeds the highest independent bid or the last independent transaction price (whichever is higher) quoted or reported in the consolidated system at the time the purchase is made.The safe harbor applies on a daily basis, and a failure to meet any one of the four conditions will remove all of a company’s repurchases from the safe harbor for the day.Generally, companies attempt to comply with Rule 10b-18. Companies typically enter into an arrangement with a broker or dealer that agrees to implement the repurchase program according to the companies’ instructions and in accordance with the requirements of Rule 10b-18. All of the major brokerage firms understand the Rule 10b-18 requirements and implement programs accordingly.
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