Test an issuer repurchase against the Rule 10b-18 conditions
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- For each purchase the lawyer identifies, the tool lists the broker or dealer, the time, the price, and the day's volume against 25 percent of ADTV. ADTV is the average daily trading volume during the four calendar weeks preceding the week of the purchase. It records a once-a-week block only as a block the lawyer tests under paragraph (a)(5). It does not decide that the safe harbor applies.
- What the lawyer must review
- Rule 10b-18, 17 CFR § 240.10b-18, and Item 703, 17 CFR § 229.703. Rule 10b-18(b) provides that Rule 10b-18 purchases are not deemed to violate section 9(a)(2) or 10(b) of the Exchange Act, or Rule 10b-5, solely by reason of the time, price, or amount of the purchases, or the number of brokers or dealers, if the issuer or affiliated purchaser effects them according to each condition in the paragraph. Purchases must be effected from or through only one broker or dealer on any single day, except for purchases not solicited by or for the issuer or its affiliated purchasers, except that the issuer and all affiliated purchasers must use the same broker when more than one of them purchases on a day, and except that a broker-dealer that is not an ECN or other ATS may access ECN or ATS liquidity. Purchases must not be the opening regular-way purchase reported in the consolidated system. For a security with an ADTV value of $1 million or more and a public float value of $150 million or more, they must not be effected during the 10 minutes before the scheduled close of the primary trading session in the principal market and during the 10 minutes before the scheduled close in the market where the purchase is effected. For all other securities that period is 30 minutes. Purchases may be effected after the close of the primary session until consolidated last-sale reporting ends, at a price that does not exceed the lower of the closing price of the primary session in the principal market and any lower bids or sale prices subsequently reported in the consolidated system, if the other conditions are met, and that purchase must not be the opening transaction of the next session. The price must not exceed the highest independent bid or the last independent transaction price, whichever is higher, quoted or reported in the consolidated system. Paragraphs (b)(3)(ii) and (iii) state the price test where the security is not quoted in the consolidated system, and where neither of those markets applies. Volume by the issuer and affiliated purchasers on a day must not exceed 25 percent of ADTV. Once each week, one block purchase may be effected in lieu of that day's 25 percent limit if no other Rule 10b-18 purchases are effected that day and the block is not included in the four-week ADTV. Paragraph (d) provides that no presumption of a violation arises if the purchases do not meet paragraph (b) or (c). Preliminary note 2 requires reporting issuers to report repurchasing activity under Item 703 whether or not the purchases meet the rule. The lawyer decides whether the safe harbor applies.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Potential support includes identifying points for review. Confirm the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Open each relied-on authority independently. Confirm its existence, current status, proposition and any quotation or pinpoint reference.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.