Rule 10b-18

Full definition

Rule 10b-18 is a safe-harbor regulation adopted by the Securities and Exchange Commission in 1982 that gives public companies a defined, non-exclusive path to repurchase their own common stock without exposure to claims of price manipulation under Section 9(a)(2) or Rule 10b-5 of the Securities Exchange Act of 1934.

To qualify for the safe harbor, an issuer must satisfy four conditions on every trading day repurchases occur:

1. Single broker or dealer. All Rule 10b-18 purchases for a given day must be routed through one broker or dealer (limited carve-outs exist for after-hours).
2. Time of purchase. Purchases cannot be the opening transaction, and cannot occur within the last ten minutes of the trading session for actively traded securities (last thirty minutes for less-liquid).
3. Price. Purchase price cannot exceed the higher of the highest independent bid or the last independent transaction price reported in the consolidated system.
4. Volume. Daily Rule 10b-18 purchases are capped at 25% of the security's average daily trading volume over the prior four calendar weeks. One block purchase per week is excluded from the daily limit.

Compliance is non-exclusive: an issuer outside the safe harbor isn't automatically manipulating its stock, but compliance materially reduces enforcement and litigation risk. Public companies disclose Rule 10b-18 issuer-purchase activity in the issuer-purchase table of Form 10-Q and Form 10-K.

Key facts

Frequently asked questions

What is Rule 10b-18?

Rule 10b-18 is an SEC safe harbor that protects public-company issuers from market-manipulation liability when they repurchase their own common stock under four conditions: single broker, time-of-day restrictions, price limits, and a daily volume cap of 25% of average daily volume.

Is Rule 10b-18 mandatory?

No. Rule 10b-18 is a non-exclusive safe harbor. Issuers may repurchase shares outside its terms but lose the affirmative defense against manipulation claims. The vast majority of large US issuers structure their open-market buyback programs to comply.

Where do I find Rule 10b-18 disclosure?

Public companies disclose Rule 10b-18 activity in the issuer-purchase table appended to Form 10-Q (quarterly) and Form 10-K (annual). The table breaks repurchases out by month, listing total shares, average price paid, and shares purchased under publicly announced programs.

Does Rule 10b-18 apply to Accelerated Share Repurchases?

An Accelerated Share Repurchase (ASR) is a separate structure executed via an investment bank under a contractual forward agreement; ASRs are typically structured under Rule 10b5-1 plans rather than Rule 10b-18 daily-conditions safe harbor.