WORK
SEC Rule 10b-18
The 1982 regulatory safe harbor that legalized corporate stock buybacks—removing the primary legal barrier to open-market share repurchases and enabling the trillions in distributions that define the downsize-and-distribute era.
Rule 10b-18, adopted by the Securities and Exchange Commission on November 17, 1982, established conditions under which a corporation's repurchase of its own shares would be presumed not to constitute illegal stock manipulation. The rule specified four conditions: manner of purchase (through a single broker on any given day), timing (no purchases at the open or during the last half hour of trading), price (not exceeding the highest independent bid or last sale price), and volume (not exceeding twenty-five percent of average daily trading volume). Purchases meeting these conditions received a legal safe harbor—the SEC would presume them lawful and would not bring manipulation charges. This four-page regulatory change transformed American corporate finance. Before 1982, buybacks were rare and legally risky. After 1982, they exploded into a trillion-dollar-per-decade phenomenon. Lazonick identifies Rule 10b-18 as the single most consequential regulatory decision in the history of American corporate governance, because it removed the primary institutional barrier preventing the conversion of corporate earnings into shareholder distributions. In the AI era,