What is the minimum threshold of securities an institution must own and invest on a discretionary basis to qualify as a qualified institutional buyer (QIB) under Rule 144A?
- A$25 million
- B$50 million
- C$100 million✓ Correct answer
- D$500 million
Why C — $100 million
Under Rule 144A(a)(1), a qualified institutional buyer is an institution that owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the institution. For registered broker-dealers, the threshold is lower at $10 million. Banks and savings institutions must additionally have a net worth of at least $25 million. The QIB standard was designed to identify sophisticated institutional investors capable of evaluating investment risks without the full protections of SEC registration.
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