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SEC’s Rule 10b-18 helped shift US firms toward stock buybacks
The share-flow data highlighted in the article shows negative buyback flows rose from 19% of quarters before 1982 to 81% after the SEC introduced Rule 10b-18.
ETF Trends revisits the SEC’s November 1982 shift on stock buybacks, when the regulator moved to clarify that repurchases would be evaluated under specific “safe harbor” conditions rather than treated as potentially abusive market manipulation. The outlet says Rule 10b-18 codified requirements for companies to receive safe harbor protection when buying back their own shares. It also notes the article’s discussion of why buybacks became a key shareholder-return tool, contrasting dividends, which are subject to corporate earnings taxes and then taxed again at the shareholder level, with buybacks, which are not taxed in the same way and can reduce shares outstanding. Using Federal Reserve Financial Accounts data for the non-financial corporate sector, ETF Trends reports that the share-flow chart shows the proportion of quarters with negative share flows increased sharply after the rule change. It states that before 1982, 19% of quarters had negative flows, while after Rule 10b-18 this figure rose to 81%. The article also links the regulatory change to a broader governance shift, describing how shareholder primacy gained traction in corporate decision-making. ETF Trends adds that as management compensation increasingly included shares, persistent buybacks became more entrenched as firms aimed to prioritize shareholder returns.