Qualified institutional buyer
In law, a Qualified Institutional Buyer 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.
Country Specific Laws
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."
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 issuers of the securities have chosen not to register the securities and therefore not make them available to the general public.[2]
References
- ^ "Defining the Term "Qualified Purchaser" under the Securities Act of 1933". Securities and Exchange Commission 17 CFR Part 230 [Release No. 33-8041; File No. S7-23-01]. Retrieved 2006-05-24.
- ^ "Qualified Institutional Buyer - QIB". Investopedia.com. Retrieved 2006-05-24.
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