Final answer:
The correct answer is option C. Under Rule 144A, an issuer of restricted stock is permitted to sell to Qualified Institutional Buyers (QIBs), including entities like insurance companies, pension funds, and mutual funds. QIBs manage sizable security portfolios and are considered sophisticated investors capable of independent protection.
Step-by-step explanation:
Under Rule 144A, an issuer of restricted stock is permitted to sell to Qualified Institutional Buyers (QIBs). Rule 144A is a regulation enforced by the U.S. Securities and Exchange Commission that parcels out exemptions to the mandatory registration of securities with the commission. This rule provides a more efficient way for companies that are raising capital to sell their securities privately, without undergoing the lengthy and expensive process of registration.
A QIB is typically an entity that manages a portfolio of securities valued at $100 million or more and is subject to fewer protective regulations because they are considered sophisticated investors. Examples of QIBs include insurance companies, pension funds, and mutual funds. They are favored under Rule 144A because these large institutional investors are presumed to be able to fend for themselves without the protections provided by a public offer's registration process.
It's important to note that Rule 144A applies only to transactions between issuers and QIBs. The rule does not extend to transactions involving other types of investors, such as non-accredited investors, accredited investors who are not QIBs, or financial institutions that do not meet the definition of a QIB.