Silver Falcon Mining

Thanks for reminding us of the rules. After a quick googling, it appears that 25% of the 4 week average daily volume can be bought back each day. With what appears to be an average between 500k-1M shares, that would mean maybe 125k-250k shares could be bought back daily. Also, they can't pay higher than the present bid or the last trade- so if someone has hit the ask on part of a block, they can buy up the rest at the same price. The buyback should be interesting to watch, especially if the big sellers have really disappeared and the low volume is due to more shares being tightly held.

Here are a couple summaries of the rules:

In the United States, buybacks are covered by multiple laws.

According to SEC Rule 10b-18:

• One Broker-dealer per Day: The company repurchasing shares may not use more than one broker or dealer to acquire the shares per each day.
• Timing of Purchase: A repurchase may not be the first trade of the day. Repurchases cannot be made in the last 10 minutes of the trading day, or 30 minutes if the company's ADTV is less than $1 million and has a public float of less than $150 million. These rules do not apply to over-the-countersecurities, which are not traded on the NYSE or Nasdaq.
• Purchase Price: A repurchase may not be bid at a price higher than the highest independent bid or last price of the last trade.
• Volume: Repurchases per day may not exceed 25% of the average daily volume of the previous 4 calendar weeks. Block purchases not executed by a broker-dealer are excluded from this restriction.

From another source:

* During any one day, a company--together with affiliated purchasers (such as individuals involved in the decision to buy in stock)--can purchase or make bids through only one broker or dealer. For instance, the CFO cannot buy stock for his own account through a different broker.

* Neither the company nor affiliated purchasers can do the opening trade on that market that day; they are also forbidden from trading during the last half hour before the market's close.

* The company and affiliated purchasers can't bid at or settle at a purchase price that exceeds the highest current independent bid quote or the last independent sales price, whichever is higher.

In addition to the multiple broker, price and time restrictions, complex guidelines cap the allowable trading volume.

* On any single trading day, the company can't purchase more than the greater of either one round lot (100 shares) or the number of round lots that is closest to 25% of the company's stock's average daily trading volume in the four previous calendar weeks.

The volume restriction in the safe harbor allows an exception for block purchases. That can increase a program's flexibility significantly. To qualify as a block, the stock purchase must have at least one of the following characteristics:

* A price of $200,000 or more.

* At least 5,000 shares and a price of $50,000 or more.

* At least 20,000 shares and 150% of the stock's average daily trading volume (excluding block trades) for the preceding four calendar weeks.

"So if there is a big chunk of shares out there--and often these are privately negotiated trades that are not on the market--that trade isn't included in the volume restriction," Donegan says. "The idea is that there isn't the opportunity for market manipulation when the company is buying a large block back from one stockholder" In fact, if such a large block were to be thrown into the open market, it would probably cause a supply--demand imbalance, forcing the stock price down. That would not be good for the other investors.

CPAs should ensure that their company has "a firm, and regularly adhered to, insider trading policy about which employees, officers and directors and others have been informed, and about which they are regularly updated and reminded" Barnard says. The corporate repurchase program should conform to that insider trading policy. At most companies, that means that employees must clear purchases of the company's stock in advance through the legal department. Accordingly, any executive with potential inside information should inform the legal department that it should veto any repurchases.