Qualified Institutional Buyer

A Qualified Institutional Buyer (or QIB), in law and finance, is a purchaser of securities that is deemed financially sophisticated and is legally recognized by security market regulators to need less protection from issuers than most public investors. Typically, the qualifications for this designation are based on an investor's total assets under management as well as specific legal conditions in the country where the fund is located.

Certain private placements of stock and bonds are made available only to Qualified Institutional Buyers to limit regulatory restrictions and public filing requirements.

Country Specific Laws

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 of 1933.

A Qualified Institutional Buyer is an investing entity owning and investing large amounts of securities on a discretionary basis. The threshold is defined as ownership of at least $100 million of securities not affiliated with the entity and dependent on the type of entity. [cite web | title=Defining the Term "Qualified Purchaser" under the Securities Act of 1933 | work=Securities and Exchange Commission 17 CFR Part 230 [Release No. 33-8041; File No. S7-23-01] | url=http://www.sec.gov/rules/proposed/33-8041.htm | accessdate=2006-05-24] Additionally, Qualified Institutional buyers must be entities that fall under one of several categories including an insurance company, investment company, employee benefit plan, trust fund, Business Development Company, 501(c)(3) not-for-profit organization, corporation , partnership, business trust or investment adviser. An individual cannot be designated as a Qualified Institutional Buyer without first establishing an entity falling under one of the previous categories.

QIBs are eligible to participate in a restricted market known as the "Rule 144A market" that is not available to the public because the issuers of the securities have chosen not to register the securities and therefore not make them available to the general public. [cite web | title=Qualified Institutional Buyer - QIB | work=Investopedia.com | url=http://www.investopedia.com/terms/q/qib.asp | accessdate=2006-05-24]

India

The Securities and Exchange Board of India has defined a Qualified Institutional Buyer as follows: [As defined in Clause 2.2.2B(v) of Chapter II of The SECURITIES AND EXCHANGE BOARD OF INDIA (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 (as amended up to May 2007) [http://india.smetoolkit.org/india/en/content/en/30151/SEBI-CFD-DIL-DIP-Circular-No-11-14-Aug-03-Part-i-Amendments-to-the-SEBI-Disclosure-and-Investor-Protection-DIP-Guidelines-2000 SEBI/CFD/DIL/ DIP/ Circular No 11: (14-Aug-03) (Part i) Amendments to the SEBI (Disclosure and Investor Protection){ DIP} Guidelines,2000] (SME Toolkit India)]

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.

ee also

*Accredited investor
*Private placement
*Rule 144A
*Securities Act of 1933
*Securities and Exchange Commission

References