Qualified Institutional Buyer

From Wikipedia, the free encyclopedia

This article or section may require cleanup to meet Wikipedia's quality standards.
Please help improve this article or replace this tag with a more specific message. This article has been tagged since October 2005. (help, talk)

The examples and perspective in this article or section may not represent a worldwide view of the subject.
Please improve this article or discuss the issue on the talk page.

A Qualified Institutional Buyer in law is a purchaser of securities that is financially sophisticated and is legally recognized by security market regulators to need less protection from sellers than most members of the public. For mutual funds it is generally an investor that is investing a large amount of money and presumably also meets the legal conditions in the country where the fund is located.

1 Country Specific Laws
- 1.1 India
- 1.2 United States
2 References

[edit] Country Specific Laws

[edit] India

The Securities and Exchange Board of India has defined a Qualified Institutional Buyer as follows:^{[citation needed]}

"Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified Institutional Buyer’ shall mean:

"a) Public financial institution as defined in section 4A of the Companies Act, 1956;

"b) Scheduled commercial banks;

"c) Mutual funds;

"d) Foreign institutional investor registered with SEBI;

"e) Multilateral and bilateral development financial institutions;

"f) Venture capital funds registered with SEBI.

"g) Foreign Venture capital investors registered with SEBI.

"h) State Industrial Development Corporations.

"i) Insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA).

"j) Provident Funds with minimum corpus of Rs.25 crores

"k) Pension Funds with minimum corpus of Rs. 25 crores

"These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process."

[edit] United States

The term "qualified institutional buyer" or "QIB" is defined by the United States Securities and Exchange Commission in Rule 144A under the Securities Act. Generally it is an entity owning and investing large amounts of securities, with the threshold ranging from $10 million to $100 million of securities not affiliated with the entity and dependent on the type of entity.^[1] They are eligible to participate in a restricted market known as the "Rule 144A market" that is not available to the public because the issuer of the securities has not chosen to spend the money and effort to make the required public disclosures and to register the securities. ^[2]