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8000 - Miscellaneous Statutes and Regulations
{{10-31-07 p.9401}}
PART 240—GENERAL RULES AND REGULATIONS,
SECURITIES EXCHANGE ACT
OF 1934
ATTENTION ELECTRONIC FILERS
THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S--T
(PART 232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND
SUBMISSION OF DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING
TO THE PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT
CONTAINED IN THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF
REGULATION S--T FOR DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC
FORMAT.
* * * * *
§ 240.10b-5 Employment of manipulative and deceptive devices.
It shall be unlawful for any person, directly or indirectly, by the
use of any means or instrumentality of interstate commerce, or of the
mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not
misleading, or
(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person, in
connection with the purchase or sale of any security.
[Codified to 17 C.F.R. § 240.10b-5]
[Section 240.10b-5 added at 13 Fed. Reg. 8183, December 22, 1948;
amended at 16 Fed. Reg., 7928, August 11,
1951]
§ 240.10b-6 [Reserved]
* * * * *
§ 240.10b--13 [Reserved]
* * * * *
§ 240.10b--17 Untimely announcements of record dates.
(a) It shall constitute a "manipulative or deceptive device or
contrivance" as used in section 10(b) of the Act for any issuer of a
class of securities publicly traded by the use of any means or
instrumentality of interstate commerce or of the mails or of any
facility of any national securities exchange to fail to give notice in
accordance with paragraph (b) of this section of the following actions
relating to such class of securities:
(1) A dividend or other distribution in cash or in kind, except
an ordinary interest payment on a debt security, but including a
dividend or distribution of any security of the same or another issuer;
(2) A stock split or reverse split; or
(3) A rights or other subscription offering.
(b) Notice shall be deemed to have been given in accordance with
this section only if:
(1) Given to the National Association of Securities Dealers,
Inc., no later than 10 days prior to the record date involved or, in
case of a rights subscription or other offering if such 10 days advance
notice is not practical, on or before the record date and in no event
later than the effective date of the registration statement to which
the offering relates, and such notice includes:
(i) Title of the security to which the declaration
relates;
{{10-31-07 p.9402}}
(ii) Date of declaration;
(iii) Date of record for determining holders entitled to receive
the dividend or other distribution or to participate in the stock or
reverse split;
(iv) Date of payment or distribution or, in the case of a stock
or reverse split or rights or other subscription offering, the date of
delivery;
(v) For a dividend or other distribution including a stock or
reverse split or rights or other subscription offering:
(a) In cash, the amount of cash to be paid
or distributed per share, except if exact per share cash distributions
cannot be given because of existing conversion rights which may be
exercised during the notice period and which may affect the per share
cash distribution, then a reasonable approximation of the per share
distribution may be provided so long as the actual per share
distribution is subsequently provided on the record date,
(b) In the same security, the amount of
the security outstanding immediately prior to and immediately following
the dividend or distribution and the rate of the dividend or
distribution,
{{6-30-05 p.9403}}
(c) In any other security of the same
issuer, the amount to be paid or distributed and the rate of the
dividend or distribution,
(d) In any security of another issuer, the
name of the issuer and title of that security, the amount to be paid or
distributed, and the rate of the dividend or distribution and if that
security is a right or a warrant, the subscription price,
(e) In any other property (including
securities not covered under paragraphs (b)(1)(v)( b
) through ( d ) of this section) the
identity of the property and its value and basis for assigning that
value;
(vi) Method of settlement of fractional interests;
(vii) Details of any condition which must be satisfied or
government approval which must be secured to enable payment of
distribution; and in
(viii) The case of stock or reverse split in addition to the
aforementioned information;
(a) The name and address of the transfer or
exchange agent; or
(2) The Commission, upon written request or upon its own motion,
exempts the issuer from compliance with paragraph (b)(1) of this
section either unconditionally or on specified terms or conditions, as
not constituting a manipulative or deceptive device or contrivance
comprehended within the purpose of this section; or
(3) Given in accordance with procedures of the national
securities exchange or exchanges upon which a security of such issuer
is registered pursuant to section
12 of the Act which contain requirements substantially
comparable to those set forth in paragraph (b)(1) of this section.
(c) The provisions of this rule shall not apply, however, to
redeemable securities issued by open-end investment companies and unit
investment trusts registered with the Commission under the Investment
Company Act of 1940.
[Codified to 17 C.F.R. § 240.10b-17]
[Section 240.10b-17 added at 36 Fed. Reg. 11514, June 15, 1971;
amended at 37 Fed. Reg. 4330, March 2,
1972]
§ 240.10b--18 Purchases of certain equity securities by the
issuer and others.
Preliminary Notes to § 240.10b--18
1. Section 240.10b--18 provides an issuer (and its affiliated
purchasers) with a "safe harbor" from liability for manipulation
under sections 9(a)(2) of the Act and § 240.10b--5 under the Act
solely by reason of the manner, timing, price, and volume of
their repurchases when they repurchase the issuer's common stock in
the market in accordance with the section's manner, timing, price, and
volume conditions. As a safe harbor, compliance with § 240.10b--18 is
voluntary. To come within the safe harbor, however, an issuer's
repurchases must satisfy (on a daily basis) each of the section's four
conditions. Failure to meet any one of the four conditions will remove
all of the issuer's repurchases from the safe harbor for that day. The
safe harbor, moreover, is not available for repurchases that, although
made in technical compliance with the section, are part of a plan or
scheme to evade the federal securities laws.
2. Regardless of whether the repurchases are effected in accordance
with § 240.10b--18, reporting issuers must report their repurchasing
activity as required by Item 703 of Regulations S--K and S--B (17 CFR
229.703 and 228.703) and Item 15(e) of Form 20--F
(17 CFR 249.220f)
(regarding foreign private issuers), and closed-end management
investment companies that are registered under the Investment Company
Act of 1940 must report their repurchasing activity as required by Item
8 of Form N--CSR (17 CFR 249.331; 17 CFR 274.128).
(a) Definitions. Unless otherwise provided, all terms
used in this section shall have the same meaning as in the Act. In
addition, the following definitions shall apply:
(1) ADTV means the average daily trading volume
reported for the security during the four calendar weeks preceding the
week in which the Rule 10b--18 purchase is to be effected.
{{6-30-05 p.9404}}
(2) Affiliate means any person that directly or
indirectly controls, is controlled by, or is under common control with,
the issuer.
(3) Affiliated purchaser means:
(i) A person acting, directly or indirectly, in concert with the
issuer for the purpose of acquiring the issuer's securities; or
(ii) An affiliate who, directly, or indirectly, controls the
issuer's purchases of such securities, whose purchases are controlled
by the issuer, or whose purchases are under common control with those
of the issuer; Provided, however, that "affiliated
purchaser" shall not include a broker, dealer, or other person
solely by reason of such broker, dealer, or other person effecting Rule
10b--18 purchases on behalf of the issuer or for its account, and shall
not include an officer of director of the issuer solely by reason of
that officer or director's participation in the decision to authorize
Rule 10b--18 purchases by or on behalf of the issuer.
(4) Agent independent of the issuer has the meaning
contained in § 242.100 of this chapter.
(5) Block means a quantity of stock that either:
(i) Has a purchase price of $200,000 or more; or
(ii) Is at least 5,000 shares and has a purchase price of at
least $50,000; or
(iii) Is at least 20 round lots of the security and totals 150
percent or more of the trading volume for that security or, in the
event that trading volume data are unavailable, is at least 20 round
lots of the security and totals at least one-tenth of one percent
(.001) of the outstanding shares of the security, exclusive of any
shares owned by any affiliate; Provided, however, That a
block under paragraph (a)(5)(i), (ii), and (iii) shall not include any
amount a broker or dealer, acting as principal, has accumulated for the
purpose of sale or resale to the issuer or to any affiliated purchaser
of the issuer if the issuer or such affiliated purchaser knows or has
reason to know that such amount was accumulated for such purpose, nor
shall it include any amount that a broker or dealer has sold short to
the issuer or to any affiliated purchaser of the issuer if the issuer
or such affiliated purchaser knows or has reason to know that the sale
was a short sale.
(6) Consolidated system means a consolidated
transaction or quotation reporting system that collects and publicly
disseminates on a current and continuous basis transaction or quotation
information in common equity securities pursuant to an effective
transaction reporting plan or an effective national market system plan
(as those terms are defined in § 242.600 of this chapter).
(7) Market-wide trading suspension means a market-wide
trading halt of 30 minutes or more that is:
(i) Imposed pursuant to the rules of a national securities
exchange or a national securities association in response to a
market-wide decline during a single trading session; or
(ii) Declared by the Commission pursuant to its authority under
section 12(k) of the Act (15 U.S.C. 78l(k)).
(8) Plan has the meaning contained in § 242.100 of
this chapter.
(9) Principal market for a security means the single
securities market with the largest reported trading volume for the
security during the six full calendar months preceding the week in
which the Rule 10b--18 purchase is to be effected.
(10) Public float value has the meaning contained in
§ 242.100 of this chapter.
(11) Purchase price means the price paid per share as
reported, exclusive of any commission paid to a broker acting as agent,
or commission equivalent, mark-up, or differential paid to a dealer.
(12) Riskless principal transaction means a
transaction in which a broker or dealer after having received an order
from an issuer to buy its security, buys the security as principal in
the market at the same price to satisfy the issuer's buy order. The
issuer's buy order must be effected at the same price per-share at
which the broker or dealer bought the shares to satisfy the issuer's
buy order, exclusive of any explicitly disclosed markup or markdown,
commission equivalent, or other fee. In addition, only the first leg of
the
{{12-31-03 p.9405}}transaction, when the broker or
dealer buys the security in the market as principal, is reported under
the rules of a self-regulatory organization or under the Act. For
purposes of this section, the broker or dealer must have written
policies and procedures in place to assure that, at a minimum, the
issuer's buy order was received prior to the offsetting transaction;
the offsetting transaction is allocated to a riskless principal account
or the issuer's account within 60 seconds of the execution; and the
broker or dealer has supervisory systems in place to produce records
that enable the broker or dealer to accurately and readily reconstruct,
in a time-sequenced manner, all orders effected on a riskless principal
basis.
(13) Rule 10b--18 purchase means a purchase (or any
bid or limit order that would effect such purchase) of an issuer's
common stock (or an equivalent interest, including a unit of beneficial
interest in a trust or limited partnership or a depository share) by or
for the issuer or any affiliated purchaser (including riskless
principal transactions). However, it does not include any
purchase of such security:
(i) Effected during the applicable restricted period of a
distribution that is subject to § 242.102 of this chapter;
(ii) Effected by or for an issuer plan by an agent independent of
the issuer;
(iii) Effected as a fractional share purchase (a fractional
interest in a security) evidenced by a script certificate, order form,
or similar document;
(iv) Effected during the period from the time of public
announcement (as defined in § 230.165(f)) of a merger, acquisition,
or similar transaction involving a recapitalization, until the earlier
of the completion of such transaction or the completion of the vote by
target shareholders. This exclusion does not apply to Rule
10b--18 purchases:
(A) Effected during such transaction in which the consideration
is solely cash and there is no valuation period; or
(B) Where:
(1) The total volume of rule 10b--18 purchases
effected on any single day does not exceed the lesser of 25% of the
security's four-week ADTV or the issuer's average daily Rule 10b--18
purchases during the three full calendar months preceding the date of
the announcement of such transaction;
(2) The issuer's block purchases effected pursuant to
paragraph (b)(4) of this section do not exceed the average size and
frequency of the issuer's block purchases effected pursuant to
paragraph (b)(4) of this section during the three full calendar months
preceding the date of the announcement of such transaction; and
(3) Such purchases are not otherwise restricted or
prohibited;
(v) Effected pursuant to § 240.13e--1;
(vi) Effected pursuant to a tender offer that is subject to
§ 240.13e--4 or
specifically excepted from § 240.13e--4; or
(vii) Effected pursuant to a tender offer that is subject to
section 14(d) of the Act (15 U.S.C.
78n(d)) and the rules and regulations thereunder.
(b) Conditions to be met. Rule 10b--18 purchases shall
not be deemed to have violated the anti-manipulation provisions of
sections 9(a)(2) or 10(b) of the Act (15 U.S.C. 78i(a)(2) or 78j(b)),
or § 240.10b--5 under
the Act, solely by reason of the time, price, or amount of the Rule
10b--18 purchases, or the number of brokers or dealers used in
connection with such purchases, if the issuer or affiliated purchaser
of the issuer effects the Rule 10b--18 purchases according to each of
the following conditions:
(1) One broker or dealer. Rule 10b--18 purchases must
be effected from or through only one broker or dealer on any single
day; Provided, however, that:
(i) The "one broker or dealer" condition shall not apply to
Rule 10b--18 purchases that are not solicited by or on behalf of the
issuer or its affiliated purchaser(s);
(ii) Where Rule 10b--18 purchases are effected by or on behalf of
more than one affiliated purchaser of the issuer (or the issuer and one
or more of its affiliated purchasers) on a single day, the issuer and
all affiliated purchasers must use the same broker or dealer;
and
{{12-31-03 p.9406}}
(iii) Where Rule 10b--18 purchases are effected on behalf of the
issuer by a broker-dealer that is not an electronic communication
network (ECN) or other alternative trading system (ATS), that
broker-dealer can access ECN or other ATS liquidity in order to execute
repurchases on behalf of the issuer (or any affiliated purchaser of the
issuer) on that day.
(2) Time of purchases. Rule 10b--18 purchases must not
be:
(i) The opening (regular way) purchase reported in the
consolidated system;
(ii) Effected during the 10 minutes before the scheduled close of
the primary trading session in the principal market for the security,
and the 10 minutes before the scheduled close of the primary trading
session in the market where the purchase is effected, for a security
that has an ADTV value of $1 million or more and a public float value
of $150 million or more; and
(iii) Effected during the 30 minutes before the scheduled close
of the primary trading session in the principal market for the
security, and the 30 minutes before the scheduled close of the primary
trading session in the market where the purchase is effected, for all
other securities;
(iv) However, for purposes of this section, Rule 10b--18
purchases may be effected following the close of the primary trading
session until the termination of the period in which last sale prices
are reported in the consolidated system so long as such purchases are
effected at prices that do not exceed the lower of the closing price of
the primary trading session in the principal market for the security
and any lower bids or sale prices subsequently reported in the
consolidated system, and all of this section's conditions are met.
However, for purposes of this section, the issuer may use one broker or
dealer to effect rule 10b--18 purchases during this period that may be
different from the broker or dealer that it used during the primary
trading session. However, the issuer's Rule 10b--18 purchase may not
be the opening transaction of the session following the close of the
primary trading session.
(3) Price of purchases. Rule 10b--18 purchases must be
effected at a purchase price that:
(i) Does not exceed the highest independent bid or the last
independent transaction price, whichever is higher, quoted or reported
in the consolidated system at the time the Rule 10b--18 purchase is
effected;
(ii) For securities for which bids and transaction prices are not
quoted or reported in the consolidated system, Rule 10b--18 purchases
must be effected at a purchase price that does not exceed the highest
independent bid or the last independent transaction price, whichever is
higher, displayed and disseminated on any national securities exchange
or on any inter-dealer quotation system (as defined in
§ 240.15c2--11) that displays at least two priced quotations for the
security, at the time the Rule 10b--18 purchase is effected; and
(iii) For all other securities, Rule 10b--18 purchases must be
effected at a price no higher than the highest independent bid obtained
from three independent dealers.
(4) Volume of purchases. The total volume of Rule
10b--18 purchases effected by or for the issuer and any affiliated
purchasers effected on any single day must not exceed 25 percent of the
ADTV for that security; however, once each week, in lieu of
purchasing under the 25 percent of ADTV limit for that day, the issuer
or an affiliated purchaser of the issuer may effect one block purchase
if:
(i) No other rule 10b--18 purchases are effected that day, and
(ii) The block purchase is not included when
calculating a security's four week ADTV under this section.
(c) Alternative conditions. The conditions of paragraph
(b) of this section shall apply in connection with Rule 10b--18
purchases effected during a trading session following the imposition of
a market-wide trading suspension, except:
(1) That the time of purchases condition in paragraph (b)(2) of
this section shall not apply, either:
(i) From the reopening of trading until the scheduled close of
trading on the day that the market-wide trading suspension is imposed;
or
{{6-30-05 p.9407}}
(ii) At the opening of trading on the next trading day until the
scheduled close of trading that day, if a market-wide trading
suspension was in effect at the close of trading on the preceding day;
and
(2) The volume of purchases condition in paragraph (b)(4) of this
section is modified so that the amount of Rule 10b--18 purchases must
not exceed 100 percent of the ADTV for that security.
(d) Other purchases. No presumption shall arise that an
issuer or an affiliated purchaser has violated the antimanipulation
provisions of sections 9(a)(2) or 10(b) of the Act (15 U.S.C. 78i(a)(2)
or 78j(b)), or § 240.10b--5 under the Act, if the Rule 10b--18
purchases of such issuer or affiliated purchaser do not meet the
conditions specified in paragraph (b) or (c) of this section.
[Codified to 17 C.F.R. § 240.10b--18]
[Section 240.10b--18 added at 47 Fed. Reg. 53339, November 26,
1982; amended at 62 Fed. Reg. 543, January 3, 1997, effective March 4,
1997; 68 Fed. Reg. 64970, November 17, 2003, effective December 17,
2003; 70 Fed. Reg. 37618, June 29, 2005, effective August 29, 2005,
Compliance Dates: For specific phase-in dates for compliance with the
final rules and amendments, see section VII of this release]
* * * * *
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