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144a offering

Rule 144A, under the Securities Act of 1933, as amended (the “Securities Act”) provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private resales of minimum $500,000 units of restricted securities to QIBs (qualified institutional buyers), which generally are large institutional investors that own at least $100 million in investable assets. 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.

Since its adoption, Rule 144A has greatly increased the liquidity of the securities affected. This is because the institutions can now trade these formerly restricted securities amongst themselves, thereby eliminating the restrictions that are imposed to protect the public. 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. Rule 144A has become the principal safe harbor on which non-U.S. companies rely when accessing the U.S. capital markets.

Since 1990, the Nasdaq Stock Market offers a compliance review process which grants Depository Trust & Clearing Corporation (DTCC) book-entry access to 144A securities. Nasdaq launched an Electronic Trading Platform for 144A securities called PORTAL.

Rule 144A should not be confused with rule 144, which permits unregistered sales of restricted and controlled securities within certain limits.

A 144A offering is considered the fastest way to raise a large amount of capital, save an initial public offering (IPO).

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