An investment bank is a financial institution that assists corporations and governments in raising capital by underwriting and acting as the agent in the issuance of securities. An investment bank also assists companies involved in mergers and acquisitions, derivatives, etc. Further it provides ancillary services such as market making and the trading of derivatives, fixed income instruments, foreign exchange, commodity, and equity securities.
Unlike commercial banks and retail banks, investment banks do not take deposits.
To provide investment banking services in the United States an advisor must be a licensed broker-dealer. The advisor is subject to Securities & Exchange Commission (SEC) (FINRA) regulation. Until 1999, the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G7 countries, have not maintained this separation historically. Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who consumed the products and services of the sell-side in order to maximize their return on investment constitutes the "buy side". Many firms have buy and sell side components.
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