4.4.1. Issuer Buy Back Rules
Occasionally, an issuer will need or want to buy back its own shares on the open market. The reasons are often similar to the reasons why an issuer may extend a tender offer—raising the share price or signaling to the market that the issuer believes its security is underpriced. Issuers that are repurchasing their securities could be accused of manipulating the market, because they may be buying their own securities in an attempt to raise the price of the security.
The SEC has created a safe harbor, Rule 10b-18, for issuers that want to repurchase their own securities for legitimate reasons. Rule 10b-18 protects an issuer and its affiliated purchasers from liability for manipulation as long as their transactions in a given day meet all of the following requirements:
• The transactions can only occur through one market maker.
• The transactions cannot exceed 25% of the average daily trading volume in the security measured over the prior four weeks, unless the issuer or affiliated purchaser is maki