QIB Private Resale Safe Harbor (144A)

The QIB private resale safe harbor is the foundation of the institutional private market. Almost every high-yield bond and many private-company equity deals use it for the U.S. institutional tranche.

Core Concept

The safe harbor permits resale of restricted securities to Qualified Institutional Buyers (QIBs) without satisfying the restricted-share resale safe harbor's holding period or volume conditions.

• The seller (and any intermediary) must reasonably believe the buyer is a QIB.
• Securities purchased remain restricted as to subsequent resale by non-QIB holders; further resale must rely on the QIB safe harbor again, the restricted-share resale safe harbor, or another exemption.
• The buyer's QIB status is the protective theory: institutional sophistication substitutes for the holding-period gating and registration-style disclosure that protect retail investors.

Exam Tip: Gotchas

• The QIB safe harbor does NOT require holding-period or volume conditions because the protective theory is the buyer's sophistication (QIB status), not the passage of time. A bond issued and immediately resold to QIBs trades freely among QIBs from day one.

QIB Definition

The QIB definition is the central gating concept. The thresholds vary by institutional type.

$100M Discretionary Securities, Not $100M AUM

The threshold is $100 million in securities held on a discretionary basis, not $100 million in total assets or assets under management. The securities must be:

• Owned and invested on a discretionary basis (the QIB makes the buy/sell decisions).
• Issued by issuers NOT affiliated with the QIB (a fund cannot count its own affiliated holdings).
• Securities in the technical 1933 Act sense (bonds, stocks, fund interests, qualifying derivatives).

A large foundation with $500 million in cash and certificates of deposit but only $80 million in securities is NOT a QIB. The cash position does not count.

Banks Have a Two-Prong Test

Banks face an additional prong: $100M in discretionary securities AND $25M audited net worth. Missing either prong fails the bank-QIB path.

Broker-Dealers Have a Lower Threshold

A registered broker-dealer can qualify as a QIB with only $10M in discretionary securities of non-affiliated issuers, or by acting in a riskless principal transaction on behalf of a QIB. This reflects the industry's reliance on broker-dealer intermediation in the institutional private market.

Exam Tip: Gotchas

• QIB is a $100M discretionary SECURITIES investment threshold, NOT $100M total AUM. The securities must be of issuers NOT affiliated with the QIB. A large foundation with $500M cash but only $80M in securities is NOT a QIB. Broker-dealers are the only category with a lower threshold ($10M).
• Banks need $100M discretionary securities AND $25M net worth (both prongs). Missing either fails the bank-QIB path.

General Solicitation in the QIB Safe Harbor

The JOBS Act loosened the QIB safe harbor's marketing restriction.

• Pre-JOBS Act: Offers in QIB resale transactions had to be limited to QIBs.
• Post-JOBS Act: Offers may be made to non-QIBs, including via general solicitation, provided sales are made only to persons reasonably believed to be QIBs.

Unlike the verified-AI Reg D safe harbor, the QIB safe harbor does NOT require "reasonable steps to verify." The seller only needs reasonable belief of QIB status (the pre-existing standard).

Exam Tip: Gotchas

• General solicitation is permitted in QIB resale OFFERS, but SALES must still be to QIBs only. The marketing audience can be broader than the sales audience. Reasonable belief (not the verified-AI safe harbor's verification standard) governs QIB status.

Typical Deal Structure: Statutory Private Placement + QIB Resale

Most institutional private placements pair a primary statutory-exemption sale with an immediate QIB resale.

• Issuer sells to an initial purchaser (an investment bank) in a primary no-public-offering exemption sale.
• Initial purchaser immediately resells to QIBs under the QIB safe harbor.
• Buyers receive an offering memorandum that resembles a prospectus but is unregistered.
• The deal is often paired with an offshore tranche under the offshore offering safe harbor for non-U.S. investors.

This structure is the standard for:

• High-yield bond offerings (most U.S. high-yield debt is sold this way)
• "144A for life" equity deals (issuer never registers; equity trades among QIBs indefinitely)
• Structured products and convertible debt sold to institutions

Restricted-Share Resale Safe Harbor vs QIB Safe Harbor Side-by-Side

Exam Tip: Gotchas

• The two safe harbors solve different problems. The restricted-share resale safe harbor protects retail buyers via time (holding period) and information (current public information). The QIB safe harbor protects retail buyers via exclusion (only QIBs can buy). Choosing between them is about WHO the buyer is, not WHEN the seller wants to act.