The Role of Investment Bankers Essay Example | Topics and Well Written Essays - 1250 words

The Role of Investment Bankers - Essay ExampleAs far as the role of investiture banker is concerned, it encompasses three major activities origination, risk bearing, and distri besidesion.Origination requires decisions about the type (e.g., debt, equity), quantity, price, timing, and another(prenominal) features of the new securities issue and the inclination of the method of distribution. Risk bearing comes into play when the issue is a firm-commitment offering, in which the underwriter buys the securities from the issuer at a fixed price and resells them to the public. It is by far the most common form of underwriting. If the price of the securities falls forward they can be resold, the underwriter will suffer a loss, thus the risk associated with this activity.Occasionally, underwriters suffer square(p) losses due to abrupt declines in some underwritten offerings. The investment bankers have been the subject of more persistence analysis than has the overall broker-dealer ind ustry. Pugel and White ( 210-14) studied the investment-banking industry using the structure-conduct-performance paradigm in a devotion of allowing commercial bank affiliates to underwrite corporate securities. Rogowski and SorensenInvestment banking has always been a highly profitable but risky business for securities firms. Before Rule 415 was enacted, underwriting was very profitable, especially for the leading firms. Some of the profits were the case of entry barriers into the ranks of the top underwriters. But with Rule 415, the profitability of underwriting traditional corporate issues has declined. Now, the high-profit lines are not sort of as profitable, although, there are always opportunities for securities firms, because of the ever-changing market conditions. For example, the opening of Eastern Europe whitethorn provide an area in which the ability of Wall Street firms to develop new products might be put to good use. As the Eastern European countries introduce more m arket-oriented approaches to economic management, there whitethorn be a need for unique securities instruments that would be compatible with the types of ownership that will emerge in these countries. (Mandelker, 683-94)The riskier economic environment and the importance of innovations and diversifications for securities firms call for a new regulative approach. The central focus of federal securities regulation has been to provide investors with sufficient material information to make informed investment decisions, to prohibit malingerer in connection with the sale of securities, and to provide a safe and sound securities industry environment. (Dale, 3-13) The broad regulatory charge of protecting investors and maintaining fair and orderly markets grew out of the stock market crash of 1929 and the fraud, securities price manipulation, and other practices that took place before the crash. In the current, more volatile environment for securities firms, regulators must be more rea ctive to the needs of the regulated firms. Important new financial instruments have helped securities firms manage the increasing risks they face, and the regulators should facilitate the reading of these instruments. Entry into the basic