Investment bank

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An Investment bank is a financial institution that facilitates mergers & acquisitions activity between companies and trades equity, derivative & debt securities. Typical securities traded include bonds, shares/stock and futures. Some investment banks also provide financial planning and wealth management services to both individual and institutional clients.

Well-known investment banks include Goldman Sachs, Merrill Lynch and Citigroup. Other well-known brokerage firms include Moelis & Company, Lazard, Piper Jaffray and Deutsche Bank. Investment banks are different from commercial banks in the fact that investment banks don't accept deposits, although some banks such as Citigroup do provide commercial banking services to both individuals and small businesses. Other services provided may include investment management, merchant banking, insurance and asset management.

There are two mainline businesses for investment banks. The trading and sale of securities (debt or equity) for cash & their promotion (underwriting, roadshows, launching IPOs & equity research) is known as the "sell side" while prospecting for buyers who want advisory on investment services such as M&A is known as the "buy side." Typical buy-side clients include private equity firms, hedge funds, mutual funds, insurance companies and pension funds; typical sell-side clients include companies wanting to issue securities (debt or equity), go public or merge with another company, as well as government agencies wanting to issue debt (government bonds) for financing a project. These activities of issuing securities & prospecting for buyers is the "front office" component of an investment bank. "Middle office" operations sometimes include risk management, corporate treasury, financial control and occasionally, equity research. The "back office" portion is usually the operations, HR, technology, accounting and regulatory compliance departments of a bank.

All investment banks (regardless of size), financial advisors & stockbrokers (regardless of position, whether an analyst or a managing director) must be licensed with Financial Industry Regulatory Authority (FINRA) & the Securities and Exchange Commission (SEC) in order to provide brokerage, investment banking and financial advisory services. FINRA is the regulator for all investment banks and registered securities representatives; it is a member-funded self-regulatory organization, not a government agency unlike the SEC. Any individual wishing to be a stockbroker/investment banker must pass the Series 7 - General Securities Representative exam before being an authorized person to sell securities and advise clients; they must be sponsored & employed by a member firm of FINRA in order to take the Series 7.

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