8000 - Miscellaneous Statutes and Regulations
PART 240GENERAL RULES AND REGULATIONS,
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PROVISIONS RELATING TO THE PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S--T FOR DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.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]
§ 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:
(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,
(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]
§ 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:
(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 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
(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
(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:
(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]