Rule 144A
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Rule 144A, adopted pursuant to the U.S. Securities Act of 1933, as amended "the Securities Act" provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private resales of restricted securities to QIBs (qualified institutional buyers), which generally are large institutional investors with over $100 million in investible assets. When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the condition that it may not make offers to persons other than those it reasonably believes to be QIBs.
Since its adoption Rule 144A has greatly increased the liquidity of the securities affected. This is because the institutions can now trade these formally restricted securities amongst themselves, thereby eliminating the restrictions that are imposed to protect the public. Rule 144A was implemented in order to induce foreign companies to sell securities in the US capital markets. For firms registered with the SEC or a foreign company providing information to the SEC, financial statements need not be provided to buyers.
Shares purchased pursant to Rule 144 must be held for one year.
