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Difficulty: EasyMarket Participants and Investor Classifications

Under SEC Rule 144A, which of the following criteria must an institutional investor satisfy to be classified as a Qualified Institutional Buyer (QIB)?

  1. Owning and investing at least $100 million in securities of unaffiliated issuersAnswer
  2. B
    Maintaining an individual net worth exceeding $1,000,000, excluding the primary residence
  3. C
    Operating as a self-regulatory organization empowered with statutory criminal prosecution authority
  4. D
    Executing customer orders exclusively on an agency basis in exchange for a commission

Answer

Owning and investing at least $100 million in securities of unaffiliated issuers
Under SEC Rule 144A, a Qualified Institutional Buyer (QIB) is defined as an institution (such as a bank, insurance company, or investment company) that owns and invests at least $100 million in securities of non-affiliated issuers on a discretionary basis.

Step-by-Step Solution

1
Identify the governing rule and targeted entity classification
The question asks for the criteria required for an institution to qualify as a Qualified Institutional Buyer (QIB) under SEC Rule 144A.
Rule 144A provides a safe harbor exemption for the resale of restricted securities to QIBs.
2
Recall the portfolio asset threshold required for QIB status
An institution must manage or own/invest at least $100 million in securities of unaffiliated issuers.
This high asset threshold ensures that only sophisticated institutional entities participate in Rule 144A transactions.

Key Concept

Qualified Institutional Buyer (QIB) Thresholds under SEC Rule 144A
Estimated Time:45s
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Topics

Market Participants and Investor Classifications

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