Week 6 Flashcards
What is a bulge-bracket firm?
Bulge bracket is also a catchall term for the most profitable multi-national investment banks in the world, whose banking clients are normally large institutions, corporations, and governments.
What is a bought deal?
Investment bank agrees to buy all unsold shares
What is a best-efforts deal?
The deal collapses if the shares don’t sell out
What is the Glass-Steagall act?
The Glass–Steagall legislation describes four provisions of the United States Banking Act of 1933 separating commercial and investment banking.
The separation of commercial and investment banking prevented securities firms and investment banks from taking deposits, and commercial Federal Reserve member banks from
dealing in non-governmental securities for customers,
investing in non-investment grade securities for themselves,
underwriting or distributing non-governmental securities,
affiliating (or sharing employees) with companies involved in such activities.
What is the Volker rule?
But can underwrite. The rule is often referred to as a ban on proprietary trading by commercial banks, whereby deposits are used to trade on the bank’s own accounts, although a number of exceptions to this ban were included in the Dodd-Frank law.
What is the Gramm–Leach–Bliley Act (GLBA)?
Repealed the two provisions restricting affiliations between banks and securities firms.[
What is the prudent man/person rule?
the prudent-person rule sets a reasonable expectation that the person will make rational, intelligent decisions when making investment choices on behalf of the client.
Why was Glass-Steagal repealed?
American firms claimed it made it difficult to compete with European firms that didn’t have the restriction that separated banking from investment banking
Why do underwriters underprice IPOs?
They want to be like ticket sales people and create excitement for the offering and sell out
What is a rating agency?
It rates the reliability of securities
What were the two biggest assets of the average (not median) US household in 2015?
Real estate and pension funds
What best describes the prudent person rule?
A law mandating that investment managers must do what another educated experienced investment manager might do in a similar situation
What is the difference between a mutual fund and a closed end fund?
A closed end fund is like an ipo
What are brokers?
BOAC: Brokers act on behalf of Others as their Agent for which they earn a Commission That is, he charges a commission as a finders fee, for finding someone who will sell a stock his client wants to buy
What is a dealer?
DHPM: Dealer always acts for Himself as a Principal in the transaction making a Markup. If dealer owns shares, he sells at a markup, and if he is buying shares he buys at a discount, the difference between the two prices of which is called a bid-ask spread.
