Some Comments on the Amended 'Block' Exception Under the Volume Condition of SEC Rule 10b-18 and on New Item 703 to SEC Regulations S-K and S-B

摘要

Rule 10b-18 of the U.S. Securities and Exchange Commission ("SEC") provides issuers with a "safe harbor" from liability for manipulation when they repurchase their common stock on the open market in accordance with the Rule's manner, timing, price and volume conditions. The Rule was first promulgated in SEC Release No. 34-19244 (Nov. 17, 1982). Since that time, Rule 10b-18 has functioned very well, and has not, until recently, been significantly amended. As we noted in the Fall 2003 issue of SRLJ, the SEC has repeatedly stated that Rule 10b-18 is not the exclusive means by which a legal corporate repurchase can be made. We also noted in that article that despite the above assurances from the SEC, most issuers purchasing their own stock in the open market have, since the effective date of Rule 10b-18 (December 10, 1982), insisted that such repurchases be made pursuant to the Rule. As noted above, since its effective date, Rule 10b-18 has, in our experience, worked very well, and has not, until recently, been significantly amended. In our experience, most issuers have been comfortable that because they are complying with the Rule, they will not be accused of market manipulation in connection with corporate open market repurchases. Furthermore, it is our belief that the SEC and its staff have been pleased with the operation of the Rule during the approximately 24 years that it has been in effect.