Investment banking
In the financial services industry, an investment bank is a financial services organisation or corporate division that participates in advisory-based financial transactions on behalf of people, businesses, and governments. Traditionally connected with corporate finance, a bank of this kind may help a customer in generating financial resources by underwriting or serving as the client's agent in the issue of bonds or other securities. An investment bank may also aid corporations in the process of mergers and acquisitions (M&A), as well as providing auxiliary services such as market making, derivatives and equity securities trading, and FICC services (foreign exchange and currency trading) (fixed income instruments, currencies, and commodities). Most investment banks have prime brokerage and asset management divisions that work in tandem with their investment research operations. This is a common practise. Bulge Bracket (highest tier), Middle Market (mid-level enterprises), and Boutique Market are all classifications used to describe the sector as a whole (specialized businesses).
Investment banks, in contrast to commercial banks & retail banks, do not take customer funds. The United States maintained a division between investment banking and commercial banking from the introduction of the Glass–Steagall Act in 1933 until its repeal by the Gramm–Leach–Bliley Act in 1999. History has shown that other developed nations, including the G7, have not maintained such a division. The Volcker Rule, which was enacted as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd–Frank Act of 2010), establishes a degree of institutional separation between investment banking services and commercial banking services.
All investment banking activity is classified as either "sell side" or "buy side," depending on who is doing the work. The "sell side" encompasses the selling of securities for cash or other securities (e.g., enabling transactions, market-making), as well as the marketing of securities (e.g., distributing information about securities) (e.g. underwriting, research, etc.). The giving of advise to institutions that purchase investing services is referred to as the "buy side." The most prevalent forms of buy-side firms are private equity funds, mutual funds, life insurance companies, unit trusts, and hedge funds, to name a few examples.
In addition, an investment bank may be divided into private and public operations, with a screen between the two to prevent information from leaking between the two groups. The private portions of the bank deal with confidential insider knowledge that may not be made public, whilst the public areas, such as stock analysis, deal with publicly available information. Investment banking services in the United States must be provided by a broker-dealer that is registered with the Securities and Exchange Commission (SEC) of the United States and the Financial Industry Regulatory Authority (FINRA).