1. Investment Banks and Finance Companies

2. Use their expertise to meet specialized financial needs Unlike banks, they do not book most of the assets they handle

3. Investment Banks and Finance Companies Investment Banks service financial markets Finance Companies extend specialized credit

4. Investment Banks Also known as: Investment Dealers (Canada)‏ Broker-Dealers (US)‏ Securities Firm (US)‏ Merchant Bank (UK)‏

5. Investment Banks: Main activities Retail brokerage Wholesale brokerage

6. Retail brokerage Discount (bare-bone) brokerage Simple execution of trade requested by client Competition based solely on size of commission Full service brokerage Provides investment advice and charges higher commissions

7. Wholesale brokerage Investing Managing assets for own account or for others Underwriting and distribution of primary and secondary securities Private placements: less stringent disclosure Public offerings: IPO, SEO, bonds, etc, must be registered Depending on the risk assumed by the bank, underwriting can be full or best-effort. Mergers & Acquisitions advisory work Deal-making Market making & principal trading Maintaining a continuos bid-ask spread backed by inventory - a secondary market - for an asset. The biggest investment dealers are also primary dealers for securities issued by the government. Other Custody, escrow, clearance and settlement services

8. Investment Banks: Quick facts Earnings very volatile - they follow the economic cycle Initially smaller and independent, Canadian investment banks were acquired by the big six and foreign companies Very high degree of liquidity - marketable securities, cash and receivable make up over 80% of assets

9. Regulation: Shared between provinces and federal government OSC most influential Licenses and monitors investment dealers Reviews prospectuses and filings of listed corporations Investigates law violations The Canadian Securities Administrators Devoted to interprovincial coordination Self-regulatory organizations Investment Dealers Association Stock exchanges

10. Finance companies Nondeposit-taking institutions that provide financing for business and consumers

11. Finance companies Acceptance financing buying extendet payment plans at a discount owned by GM, Ford, Chrysler Leasing Financial Operating Factoring purchasing accounts receivable at a discount

12. Summary Investment dealers underwrite, sell, trade, advise, and take custody of securities Most investment dealers are bank-owned subsidiaries Investment dealership business is cyclical Regulation of investment banking is complex Finance companies are the least regulated FI Carmaker-owned firms dominate finance companies