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An investment bank is a financial institution that assists individuals, corporations, and governments in raising financial capital by underwriting or acting as the client's agent in the issuance of securities (or both).

Functions of Investment Banks a. Core Business Underwriting Distributing Advising Others b. Back Office Operations Technology c. Middle Office Risk Management Corporate Treasury Financial Control Corporate Strategy Compliance d. Core Business - Underwriting Assuming the risk of selling a security issue at a satisfactory price Term borrowed from insurance e. Core Business - Distributing Selling function of investment banking The primary function of an investment bank is buying and selling products. f. Core Business - Advising Providing advice in the issuance & marketing of securities Research is the division which reviews companies and writes reports about their prospects, often with "buy" or "sell" rating g. Core Business > Others Global transaction banking Investment management Merchant banking Middle Office

O Risk Management: Involves analysing the market and credit risk that traders are taking onto the balance sheet in conducting their daily trades. Setting limits on the amount of capital that they are able to trade in order to prevent 'bad' trades having detrimental effect to a desk overall.

O Corporate Treasury: Responsible for an investment bank's funding, capital structure management, and liquidity risk monitoring.

O Financial Control: Tracks and analyses the capital flows of the firm. Adviser on essential areas such as controlling the firm's global risk exposure and the profitability and structure of the firm's various businesses.

O Compliance: Responsible for an investment bank's daily operations' compliance with government regulations and internal regulations.

O Operations & Technology: Data-checking trades that have been conducted, ensuring that they are not erroneous, and transacting the required transfers.

Types of Investment Banks There are two major types of investment banks based on their function. This might be more relevantly referred to as branches of operation in investment banking. The first is the 1. Sell side: that includes functions such as trading securities and includes the facilitation oftransactions through market-making, and the promotion and marketing of securities through research and underwriting. 2. Buy side: Refers to institutions that give guidance and advice as it pertains to buying investment services. Common entities on the buy side include insurance companies, hedge funds, unit trusts, mutual funds and private equity funds.

Private or boutique investment banks : are concerned with private and confidential information and transactions that might not be revealed to the public. They are usually smaller banking entities that specialize in one or more areas of investment products. Others in this sector focus their services on one type or one specific group of industries. These private entities carry out a variety of functions. Some may act as investment advisors while others specialize in the trade of certain assets and commodities. There are also those that offer services to specific social groups and industries. Examples of private investment banks include; Almeida Capital, Atlantic-Pacific Capital, J.P. Morgan Cazeneuve, Triage, China International Capital Corporation and CITICSecurities.

Public, Full-service or Bulge bracket investment banks : enlist a wider variety of market activities that include research, underwriting, mergers and acquisitions, trading, merchant banking, investment management and securities trading services. These bulge bracket banks are enormous investment institutions that cover all or most industries. They serve a wide variety of client types and offer most if not all possible

types of investment banking services in their portfolio. Major institutions that fall under this umbrella today are Bank of America Mer rillLynch, Barclays Capital, Citigroup, JPMorgan Chase and Morgan Stanley.

Investment Banking Services Corporate Financial & Advisory: The management and underwriting of public and private securities. Identification of investors for new ventures or for the expansion of established business. Handling of public and private companies mergers, acquisitions and rest ructuring.Undertaking of industry research or project feasibility studies. Undertaking of share valuations for various purposes. Private placements of debt and equity.

Underwriting - Guarantee that all the issued shares will be sold. If there is any portion that is unsold, the underwriting institutions themselves will take it up.

Portfolio and Investment Services: Nominee and registration services including custodianship of all types of securities. Trading of stocks, shares, Government bonds and money market securities. Management of corporate and private portfolio, trusts and pension funds. Share register and share registration services. Management of investment portfolios. Management of investment and unit trusts and property trust funds. Fund management funds.

Corporate Banking: Management of syndicated and consortium facilities in local and foreign currencies. Provision of trade financing facilities. Syndication and provision of guarantee facilities. Management and underwriting of commercial papers. Provision and arrangement of short, medium and long-term loans in Malaysia and overseas. Provision of bridging finance and project finance. Provision of factoring and leasing facilities. Capital market issues. Block discounting of hire-purchase agreements.

Syndicated Loan: When the value of loan required by a company is too large, it is possible that the company may be unable to obtain it from one single financial institution. Investment bank will help to arrange the loan from several financial institutions. Such loans are called syndicated loan. The aim of the syndicated loan is to reduce risks and exposure of each of the syndicate participants.

Fund-Based Activities: Acceptance of call and fixed deposits. Term loans Investment banks also offer a number of other services which are provided by commercial banks. Investment banks cannot accept current or demand deposits.

Services of Merchant Banking Corporate Counselling Project Counselling Capital Restructuring Services

Credit Syndication Issue Management and Underwriting Portfolio Management Working capital Finance Merger and Acquisition Venture Financing Lease financing Mutual Finance Relief to sick Industries Project Appraisal SEBI Guidelines for Merchant Banking All merchant bankers will require authorization by SEBI to carry out business. An initial authorization fee, an annual fee and renewal fee may be collected by SEBI. All issue must be managed at least by on authorized banker. Each merchant banker is required to furnish to the SEBI half yearly unaudited financial result. SEBI has prescribed the code of conduct for the each merchant banker. SEBI has the power to suspend or cancel the authorization in case of violation. To ensure the transference and accountability in operation of the merchant banker and protect the investors. Inspections will be conducted by SEBI to ensure that provisions of the regulation are properly complied.