STOCK REPURCHASE PROGRAMS CAN POSE PROBLEMS for financial executives because they may raise concerns at the SEC about insider information and stock manipulation.
IF THE COMPANY HAS MATERIAL INFORMATION that has not been made public it should not buy back stock.
BOARD AUTHORIZATION FOR PURCHASE OF that company's stock for the corporate treasury should specify:
The maximum amount of money to be spent, or the maximum number of shares to be acquired.
The rationale for the program.
The time period covered.
GETTING A WRITTEN AGREEMENT from the broker that the program will follow SEC Rule 10b-18 is a good idea. It should specify that:
The company and affiliated purchasers may work with only one broker or dealer on any single day.
The company may not buy on the opening trade on the NASDAQ National Market or during the last half hour of scheduled trading.
The company's purchase or bid price may not exceed the highest current independent bid quote or last independent sale price, whichever is higher.
The company must stay within trading volume restrictions unless it is doing a block trade.
CHECK THE BROKER'S EXECUTION of the purchases. Make sure you obtained a good price.
ED McCARTHY is a freelance writer and author specializing in finance and technology living in Warwick, Rhode Island. His e-mail address is edmccarthy1@yahoo.com .
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