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.Primarily referring to institutions that manage at least $100 million in securities including banks, savings and loans institutions, insurance companies, investment companies, employee benefit plans, or an entity owned entirely by qualified investors. Also included are registered broker-dealers owning and investing, on a discretionary basis, $10 million in securities of non-affiliates.
The Securities and Exchange Board of India has defined a Qualified Institutional Buyer as follows:[3]
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
QIBs are eligible to participate in the Rule 144A market.