Quick Answer
A qualified institutional buyer (QIB) is an institution that owns and invests, on a discretionary basis, at least
Quick Answer: A qualified institutional buyer (QIB) is an institution that owns and invests, on a discretionary basis, at least $100,000,000 in securities of unaffiliated issuers, or a registered dealer that clears a lower $10,000,000 bar. QIB status is the buyer-side gate for the QIB private resale safe harbor covered next in this unit.
00,000,000 in securities of unaffiliated issuers, or a registered dealer that clears a lowerQuick Answer: A qualified institutional buyer (QIB) is an institution that owns and invests, on a discretionary basis, at least $100,000,000 in securities of unaffiliated issuers, or a registered dealer that clears a lower $10,000,000 bar. QIB status is the buyer-side gate for the QIB private resale safe harbor covered next in this unit.
0,000,000 bar. QIB status is the buyer-side gate for the QIB private resale safe harbor covered next in this unit.QIB status exists for one purpose: defining who is sophisticated enough to buy restricted securities without the registration and disclosure protections a public offering provides. The thresholds below are what a QIB resale actually tests on the buyer's side.
What Are the QIB Thresholds by Buyer Type?
| Buyer type | Threshold |
|---|---|
| Institutional buyer, acting for its own account or the accounts of other QIBs (insurance company, registered investment company or business development company (BDC), Small Business Investment Company (SBIC) or Rural Business Investment Company (RBIC), Employee Retirement Income Security Act (ERISA) or state benefit plan, a bank- or trust-company-trustee trust fund whose participants are exclusively state or ERISA benefit plans, excluding any fund with an individual retirement account or Keogh participant, private BDC, 501(c)(3) organization, corporation, partnership, LLC, or business trust (a bank, savings and loan association, or foreign equivalent is excluded here and tested under the separate bank row below), registered investment adviser, or any other institutional accredited investor) | Owns and invests, on a discretionary basis, at least $100,000,000 in securities of issuers not affiliated with it |
| Family of registered investment companies sharing the same adviser | The family owns, in aggregate, at least $100,000,000 in securities of unaffiliated issuers |
| Registered dealer | At least $10,000,000 in securities of unaffiliated issuers, owned and invested on a discretionary basis. Securities making up the whole or part of the dealer's own unsold allotment or subscription in a public offering do not count as owned by it |
| Registered dealer acting as riskless principal for a QIB | No independent dollar threshold; it is standing in for the QIB counterparty |
| Entity in which all equity owners are QIBs | Qualifies by look-through, regardless of the entity's own holdings |
| Bank, savings and loan association, or foreign-bank equivalent | At least $100,000,000 in securities of unaffiliated issuers, AND an audited net worth of at least $25,000,000, both shown in financial statements dated within 16 months (U.S. institution) or 18 months (foreign institution) of the sale |
Exam Tip: Gotchas
- An entity that qualifies through the catch-all row, as an institutional accredited investor of a type the other rows do not name, may be formed for the specific purpose of buying the securities in this offering. That is the opposite of the accredited-investor rule you saw two lessons ago, where four of the six asset-threshold categories fail on exactly that fact.
- The dealer threshold is $10,000,000, one-tenth of the general $100,000,000 test. A question that swaps the two figures is testing whether you know which threshold applies to a dealer versus an institutional buyer.
- The bank and savings-and-loan variant needs both tests at once: the $100,000,000 securities test and the separate $25,000,000 net worth test. Meeting only one does not qualify the institution.
- "Institutional" means a different thing in each rule, and the exam trades on that. A firm's communications rule treats a natural person holding $50,000,000 in total assets as an institutional investor. That figure has nothing to do with QIB status, which needs $100,000,000 in securities owned and invested on a discretionary basis and is never satisfied by a natural person.
- Every category except the riskless-principal dealer requires the buyer to be acting for its own account or for the account of another QIB. An institution buying for a customer who is not a QIB is not acting as a QIB in that purchase.
- That capacity clause is not a rule about counting. The all-QIB-owners look-through row carries the same clause and has no dollar figure at all.
- "Owned and invested on a discretionary basis" excludes assets the institution merely custodies for someone else's account. A bank holding $150,000,000 of client securities it does not control does not meet this test on those holdings alone.
What Should You Check on Exam Day?
- Confirm whether the fact pattern names an institution ($100,000,000), a dealer ($10,000,000), or a bank/savings and loan (both $100,000,000 and $25,000,000).
- Check that the securities counted are of unaffiliated issuers; affiliated holdings do not count toward any of these thresholds.
- Watch for a riskless-principal dealer, which needs no independent dollar threshold because it is transacting on behalf of a QIB.
- Confirm the financial statement dating (16 months domestic, 18 months foreign) whenever a bank or savings and loan scenario is tested.