Roles of an Investment Banker
Roles of an Investment Banker
The primary function that an investment banker would carry out is assisting the companies to raise money through various measures like the sale of the traditional securities in the markets. These securities can be bonds, preferred stocks or common stock options. An investment bank provides three primary functions for its clients, while raising money for them
1. Investigation
Any company that wants to raise money will be approaching an investment banking firm or a banker individually for its assistance and knowledge. After that, that investment banking firm can be called as the manager or lead investment bank that is involved in the matter. The bank will give two types of analyses, for its client:
a. Legal Analysis - As a security is being sold in the market, it should in the first place be created. This is in form of the certificates, which are evidences of a legal document that would define the rights on the side of both the parties - security holder and the company. A contract can be easily 100 pages or longer. The investment bank will then construct the bond or stock agreement as necessary and then submit the same to the Securities Exchange Commission (SEC) for its approval. The SEC ensures that all required details are disclosed to prospective investors and then authorizes the issue.
b. Market Analysis - The investment banker determines the agreed fair market price to be given to securities. While in issues related to bonds, the banks tend to recommend some interest rate that can be paid so as to get an acceptable negotiation in the market: which means that the rate should be high enough to attract investors and at the same time it should low enough to serve the best interests of the company.
2. Underwriting
The purpose of underwriting something is to assume the risk that their will some loss happening in the transaction. So here, the company that issues new shares should be given an assurance that it will be able
The primary function that an investment banker would carry out is assisting the companies to raise money through various measures like the sale of the traditional securities in the markets. These securities can be bonds, preferred stocks or common stock options. An investment bank provides three primary functions for its clients, while raising money for them
1. Investigation
Any company that wants to raise money will be approaching an investment banking firm or a banker individually for its assistance and knowledge. After that, that investment banking firm can be called as the manager or lead investment bank that is involved in the matter. The bank will give two types of analyses, for its client:
a. Legal Analysis - As a security is being sold in the market, it should in the first place be created. This is in form of the certificates, which are evidences of a legal document that would define the rights on the side of both the parties - security holder and the company. A contract can be easily 100 pages or longer. The investment bank will then construct the bond or stock agreement as necessary and then submit the same to the Securities Exchange Commission (SEC) for its approval. The SEC ensures that all required details are disclosed to prospective investors and then authorizes the issue.
b. Market Analysis - The investment banker determines the agreed fair market price to be given to securities. While in issues related to bonds, the banks tend to recommend some interest rate that can be paid so as to get an acceptable negotiation in the market: which means that the rate should be high enough to attract investors and at the same time it should low enough to serve the best interests of the company.
2. Underwriting
The purpose of underwriting something is to assume the risk that their will some loss happening in the transaction. So here, the company that issues new shares should be given an assurance that it will be able