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Financial intermediaries who perform a variety
of services, including aiding in the sale of securities,
facilitating mergers and other corporate reorganizations,
acting as brokers to both individual and institutional
clients, and trading for their own accounts.
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Also
known as an underwriter, an investment bank acts
as an intermediary between corporations issuing
new securities and the public. Normally an investment
bank buys a new issue of securities for a negotiated
price. The investment bank then forms a syndicate
and resells the securities to its customers and
to the public.
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Investment
banks assist public and private corporations in
raising funds in the Capital Markets (both equity
and debt), as well as in providing strategic advisory
services for mergers, acquisitions and other types
of financial transactions. Investment banks differ
from Commercial Banks which serve to directly
take deposits and make commercial and retail loans. |
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Investment
banks provide a range of financial and investment
related services, advising clients on security
issues, acquisitions and disposals of businesses,
arranging and underwriting new issues, distributing
securities and running fund management companies.
They stand at the heart of financial markets in
that they help make both the primary market and,
through their trading desks and marketmakers,
the secondary market too.
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Investment banks assist public and private
corporations in raising funds in the capital
markets (both equity and debt), as well as in
providing strategic advisory services for mergers,
acquisitions and other types of financial transactions.They
also act as intermediares in trading for clients.
Investment banks differ from commercial banks
which take deposits and make commercial and
retail loans. In recent years, however, the
lines between the two types of structures have
blurred, especially as commercial banks have
offered more investment banking services. In
the US, the Glass-Steagall Act, initially created
in the wake of the Stock Market Crash of 1929,
prohibited banks from both accepting deposits
and underwriting securities; Glass-Steagall
was repealed by the Gramm-Leach-Bliley Act in
1998. Investment banks may also differ from
brokerages, which in general assist in the purchase
and sale of stocks, bonds, and mutual funds.
In some cases, brokerages and investment banks
are integrated into single firms.
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ROLE OF MODERN
INVESTMENT BANKS :
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-Underwriting and distributing new security
issues .
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Offering brokerage services to public & institutional
investors. |
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Providing financial advice to corporate clients,
especially on security issues, M&A deals. |
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Providing financial security research to investors
and corporate customers . |
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Market-Making, in particular securities. |
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Investment banks have also moved into foreign
exchange markets, private banking, asset management
and bridge financing.
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Investment Banking, is the traditional aspect
of investment banks which involves helping customers
raise funds in the Capital Markets and advising
on mergers and acquisitions. Investment bankers
prepare idea pitches that they bring to meetings
with their clients, with the expectation that
their effort will be rewarded with a mandate
when the client is ready to undertake a transaction.
Once mandated, an investment bank is responsible
for preparing all materials necessary for the
transaction as well as the execution of the
deal, which may involve subscribing investors
to a security issuance, coordinating with bidders,
or negotiating with a merger target.
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