Qualified Institutional Buyer (QIB)

What is a ‘Qualified Institutional Buyer – QIB’

A qualified institutional buyer (QIB) is a corporation that is deemed to be an accredited investor as defined in the Securities and Exchange Commission’s (SEC) Rule 501 of Regulation D. A QIB owns and invests a minimum of $100 million in securities on a discretionary basis; the broker-dealer threshold is $10 million.

Explaining ‘Qualified Institutional Buyer – QIB’

The range of entities deemed QIBs includes savings and loans associations (which must have a [net worth of $25 million) and banks, investment and insurance companies, employee benefit plans, and entities completely owned by accredited investors.

The Basics of QIBs

QIBs are considered to be financially sophisticated, recognized in this manner legally by U.S. law and securities market regulators. Because of this classification, QIBs are considered to require less protection from public issuers than most public investors. The qualifications for this classification are based on the QIBs’ total assets under management (AUM). Rule 144A, under the SEC, is the primary regulatory program for QIBs in the United States. For qualified investors in other countries, additional specified legal conditions apply relating to the country where each investor trades.

Securities Act Rule 144 Under the SEC

This rule governs the sales of controlled and restricted securities in the marketplace. This rule protects the interests of issuing companies, because the sales are so close to their interests. Section 5 of the Securities Act of 1933 governs all offers and sales and requires them to be registered with the SEC or to qualify for an exemption from registration requirements.

Further Reading

  • E. Banks, The Palgrave Macmillan Dictionary of Finance, Investment and Banking© Erik Banks 2010 – link.springer.com [PDF]
  • Qualified Institutional Placements-An Exploratory Study in the Indian Context – papers.ssrn.com [PDF]
  • The SEC response to internationalization and institutionalization: rule 144A merit regulation of investors – heinonline.org [PDF]
  • Role of Institutional Investors-Evidence from the Foreign “Rule 144A” Debt Market – papers.ssrn.com [PDF]
  • Determinants of IPO Subscription in India. – search.ebscohost.com [PDF]