Rule 10b-18
Candlefocus EditorThe Rule 10b-18 safe harbor provisions are intended to limit the potential for unlawful securities manipulations by prohibiting manipulative networking and timing manipulations. According to Rule 10b-18, stock repurchases can only take place within a specified price range and within a certain volume of the company's common stock.
The main objective of the Rule 10b-18 safe harbor is to promote a fair and orderly trading market, and to reduce investor concerns about manipulative stock repurchases. The rule only applies to firms whose securities are registered with the SEC, listed on a securities exchange, or traded in the over-the-counter (OTC) market. In addition to the repurchase conditions specified in the rule, the SEC also advises companies to adhere to practices such as having publicly disclosed trading plans and consulting with market advisors to ensure that their repurchase activities are in compliance.
There are three conditions that a company must meet in order to be in compliance with the Rule 10b-18 safe harbor; the transaction must be transacted at a specified volume, price range, and timing of repurchases. Furthermore, the company must disclose its repurchase activities on its Forms 10-Q, 10-K, and 20-F.
The Rule 10b-18 safe harbor provisions help protect investors and promote orderly trading by limiting certain manipulative activities. These rules serve to help protect the integrity of the capital markets by ensuring that share repurchases conducted by companies are fair and not deceptive. While the Rule 10b-18 safe harbor provisions are not mandatory, companies are strongly advised to adhere to the conditions and guidelines of the rule and to timely disseminate the necessary reports to the SEC.