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SEC Temporarily Relaxes Restrictions on Issuer Repurchases

September 19, 2008

On September 19, 2008, the Securities and Exchange Commission issued an emergency order temporarily suspending the timing restrictions and significantly increasing the volume limitation for issuer repurchases under Rule 10b-18 of the Securities Exchange Act of 1934.  The SEC also took temporary emergency action to prohibit short selling in 799 financial companies.  The actions are effective immediately and will expire at the end of the day on Thursday, October 2, 2008 unless extended by the SEC.

Rule 10b-18 provides issuers with a safe harbor to effect repurchases of their securities, provided that certain conditions are met, without running afoul of the anti-manipulation provisions of the Exchange Act.  The temporary changes to Rule 10b-18 are intended to help issuers mitigate sudden and unexplained declines in the prices of their securities, which may have no fundamental underlying basis, and to provide additional liquidity to investors during a time of market volatility.

The temporary changes to Rule 10b-18 are summarized below:


Rule Prior to
Emergency Order

Rule Following
Emergency Order

Timing of repurchase

Repurchases may not be made as the opening trade or within the last 10 minutes (or for less actively traded companies, during the last 30 minutes) of the regular trading session

Repurchases may be made at any time during the day

Volume of repurchase

Shares repurchased on any single day may not exceed 25% of the average daily trading volume (as calculated over the four calendar weeks preceding the week in which the purchase occurs), subject to an exception for block trades

The number of shares repurchased may not exceed 100% of the average daily trading volume

Use of brokerage firm

Issuer may use only one brokerage firm on any given day to effect any solicited repurchases

No change

Pricing of repurchase

Repurchases generally are restricted to a price that does not exceed the highest independent bid or the last independent transaction price, whichever is higher

No change


Issuers effecting repurchases remain subject to the prohibitions on insider trading and may not repurchase securities while in possession of material non-public information.

A copy of the SEC's emergency order concerning Rule 10b-18 is available at http://www.sec.gov/rules/other/2008/34-58588.pdf and the SEC's emergency order concerning short selling is available at http://www.sec.gov/rules/other/2008/34-58592.pdf.

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If you have any questions regarding these matters, please contact any of the Bracewell & Giuliani LLP attorneys listed below or your usual Bracewell contact.

Will Anderson

Charles H. Still, Jr.

Michael S. Telle