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Unit 24 Securities Firms and Investment Banks

Unit 24 Securities Firms and Investment Banks. Welcome. I. Introduction of SF and IB. Definition-SF and IB underwrite securities and engage in related activities such as securities trading and market making. Functions of SFs-SFs specialize primarily in the purchase sale,

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Unit 24 Securities Firms and Investment Banks

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  1. Unit 24 Securities Firms and Investment Banks

  2. Welcome

  3. I. Introduction of SF and IB • Definition-SF and IB underwrite securities and engage in related activities such as securities trading and market making. • Functions of SFs-SFs specialize primarily in the purchase sale, and brokerage of securities. (the retail side of the business) • Functions of IBs: (a) IBs engage in originating, underwriting, and distributing issue of securities; (b) IBs also underwrite corporate finance activities, such as advising on M&A or corporate restructurings.

  4. How does SF Work?

  5. IB

  6. II. Structure of the Industry • The first dimension: the national full-line firms that service both retail customers and corporate customers; • The second dimension: the national full-line firms that specialize in corporate finance and are highly active in trading securities; • The third dimension: (1) specialized investment bank subsidiaries of commercial banks; (2) specialized discount brokers that effect trades for customers without offering investment advices; (3) regional securities firms offer services to customers in a particular region, such as N.Y. or California.

  7. III. Business Activities of SF or IB • Investing (either agents for others or principals for themselves); • Market making (帮助刚发行的股票在二级市场产生较为活跃的交易); • Trading, such as position trading, pure arbitrage and risk arbitrage; • Cash management, such as the account management; • M & A; • Other service functions, such as custody and escrow services, clearance service, and research and advisory services, and acts as an agent for fee; • Investment banking: (1) public offering (公募) (i) with best-effort underwriting (代销) corporate securities market (ii) firm commitment underwriting (包销) (2) private offering (私募) (3) government securities markets

  8. IV. Regulations • Government regulation-Securities and Exchange Commission (established in 1934): National Securities Markets Improvement Act (1996) removes the most regulatory burden of imposed by states and gives the exclusive regulatory right to SEC. • Self-regulation-New York Stock Exchange (NYSE) & National Association of Securities Dealers (NASD), they monitor the daily trading abuses, such as insider trading. • Securities Investor Protection Corporation (SIPC)-it provides the fund, which protects investor accounts in the event that a member broker or dealer can not meet its financial obligations to the customers.

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