When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the condition that it may not make offers to persons other than those it reasonably believes to be QIBs.A Securities & Exchange Commission rule modifying a two-year holding period requirement on privately placed securities to permit qualified institutional buyers to trade these positions among themselves.Rule 144A was implemented in order to induce foreign companies to sell securities in the US capital markets. For firms registered with the SEC or a foreign company providing information to the SEC, financial statements need not be provided to buyers. Specifically, the rule allows private companies, both domestic and international, to sell unregistered securities, also known as Rule 144 securities, to qualified institution buyers (QIBs) through a broker-dealer. The rule also permits QIBs to buy and sell these securities among themselves. To be a QIB, the institution must control a securities portfolio of $100 million or more.Rule 144A has become the principal safe harbor on which non-U.S. companies rely when accessing the U.S. capital markets.
Not to be confused with rule 144A, rule 144, established by the SEC under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration.
This has substantially increased the liquidity of the securities affected because institutions can trade these securities amongst themselves, side-stepping limitations that are imposed to protect the public.