Confidence on Wall Street was greatly diminished; the New York Stock Exchange remained closed for six days after the attacks, and the Dow Jones Industrial Average plunged 684.81 points when it reopened.
9 CHAPTER 1 AT A GLANCE WETFEET INSIDER GUIDE CHAPTER 3 THE COMPANIES CHAPTER 4 ON THE JOB CHAPTER 5 THE WORKPLACE CHAPTER 6 GETTING HIRED CHAPTER 7 FOR YOUR REFERENCE CHAPTER 2 THE INDUSTRY FINANCIAL ADVISORY SERVICES Investment banks advise companies, government entities, and other institutions about their financial strategies and the most effective use of the financial markets. M&A advice is a high-profile I-bank service; others include assisting companies with their option programs, providing pension-fund managers with up-to-the-minute information and advice on invest- ment strategies, and helping international companies understand how to minimize their exposure to foreign currency exchange risks. SALES AND DISTRIBUTION To be an effective underwriter, an investment bank must have a wide distribution network and a knowl- edgeable sales force that can consistently find buyers for the stocks, bonds, and other financial instruments it underwrites. The bulk of underwritten securities are sold to institutional investors such as pension funds, money management firms, and mutual funds. The institutional sales force advises and cultivates these large-quantity buyers—a job that requires a lot of traveling, schmoozing, and hand-holding—and executes the sales. In addition to these institutional salespeople, some banks have a retail sales force of stockbrokers and online discount brokerage services. These funnel offerings into the hands of the average investor. However, retail sales are usually transacted by business units completely separate from I-banking. TRADING AND MARKET-MAKING SERVICES To support the institutional and retail sales efforts, most investment banks trade securities in the marketplace. When a firm decides to make a market in a particular stock, it stands ready with its own capital to buy and sell the stock at publicly quoted prices. A firm can make a market either on listed stocks, sold on the exchange floor, or on over-the-counter stocks, sold at its own trading desk. Traders usually focus on one group of stocks at a time, often becoming specialists in a particular industry. RESEARCH SERVICES Nearly all banks have a staff of research analysts that studies economic trends and news, individual company stocks, and industry developments to provide propri- etary investment advice to institutional clients and in- house groups, such as the sales and trading divisions. Until recently, the research division also has played an important role in the underwriting process, help- ing to woo the client with its industry knowledge. In many cases, research analysts’ compensation was tied to I-banking revenue. However, the Sarbanes-Oxley Act of 2002, enacted in the wake of Enron and other gargan- tuan accounting scandals, has discouraged the conflicts
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