Investment Banking Regulations

Rule 144A is a restriction placed on buyers of privately placed securities so that these securities cannot be sold for two years after acquisition. This means there is no liquidity in the market over that period of time. Buyers of privately placed securities must be compensated for this lack of liquidity. SEC Rule 144A went into effect in April 1990. The rule eliminated the two-year holding period and permitted large institutions instead to trade securities acquired in a private placement among themselves without having to register these securities with the SEC. A large institution is defined as one that holds at least $100 million of the security.

The impact of this rule is not yet known as far as what effect it might have on the growth of the private placement market. Some analysts believe the rule will encourage non-U.S. corporations to issue securities in the U.S. private placement market. The first reason for this would be to attract new large institutional investors into the market, investors who were not willing to buy private placements in the past because of the requirement that they be held for two years. With an increase in the number of such investors, non-U.S. entities may decide to issue securities. The second reason is that foreign investors have been unwilling to raise funds in

. . .
Some common words found in the essay are:
Exchange Commission, SEC Rule, Reserve Board, Form U4, NASD NASD, Rea Spiro, Prior January, Glass-Steagall Act, Exchange Act, Stock Exchange, investment advisers, private placement, investment banking, commercial banks, securities exchange, advisers currently, investment banking firms, placement market, currently registered, rules investment, advisers currently registered, analysts believe, currently registered commission, regulator trims adviser, privately placed securities,
Approximate Word count = 1085
Approximate Pages = 4 (250 words per page)

More Essays on Investment Banking Regulations