Subject:
SEC Rule 10b-18 In 1982, the US Securities and Commission adopted Rule 10b-18,4 which provides that an issuer will not be deemed to have violated Sections 9(a)(2) and 10(b) of the Exchange Act, and Rule 10b-5 under the Exchange Act, solely by reason of the manner, timing, price, or volume of its repurchases, if the issuer repurchases its common stock in the market in accordance with the safe harbor conditions.
Rule 10b-18’s safe harbor conditions are designed to minimize the market impact of the issuer’s repurchases, thereby allowing the market to establish a security’s price based on independent market forces without undue influence by the issuer.
The practical effect of this rule was to encourage massive stock buybacks by corporations as a means of manipulating prices upwards in order to give value to executive stock options.
'Defined Benefit' Pension Plans
By John Schroy, on February 26th, 2006 | 
The sponsors of ‘defined benefits’ pension plans controlled, as of December 2004, about US $2.5 trillion in equities. Common stocks, even after the crash of 2000-2001, were substantially over-valued. In order for stock prices to reflect values that were customary before the advent of stock buybacks, prices would have to drop between 20% (earnings basis) and 50% (dividend yield basis).
In the case of ‘defined benefits’ pension plans, this would represent a loss of between US$500 billion and US$1.2 trillion in market value of pension portfolios.
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