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  1. 1. Wall Street… more than just a Journal, a movie and a place. All you ever wanted to know, plus MORE! A primer for Youth, I.N.C.’s non-profit network
  2. 2. Some Background - Commercial Investment Banking Banking Glass Steagall Act: “An Act, passed by Congress in 1933, that prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities.” http://www.investopedia.com/terms/g/glass_steagall_act.asp
  3. 3. Changes in the past 5 years  Glass-Steagall Dismantled - 1999  blurs the distinction between commercial banks and brokerage firms  Management Shift  Generation of senior bankers start their own firms  Infusion of Start-Ups and Specialty Operations  Holding Company Conglomeration  Accounting Regulatory Scandals – Eliot Spitzer
  4. 4. Case Study: Business Conglomerates  CitiGroup  CitiBank  Smith Barney (private wealth management and equity research unit)  Salomon Brothers When thinking about  CitiGroup Asset Management organizational leadership  CitiGroup Private Bank and co-chairs, it is  CitiCapital important to remember that  Travelers (Insurance) someone working at  Primerica “Citigroup” can mean  CitiFinancial many many different  CitiInsurance things!  CitiMortgage
  5. 5. Manifestation  Categories of the Financial Industry  Commercial Banking – traditionally a lending function  Investment Banking – advisory/execution  Money Management – asset gatherers/ investors  Venture Capital – start –ups / pre-IPO  Hedge Funds – trading vehicle  Private Equity – funds purchasing blocks/leverage
  6. 6. Deal Flow and Vendor Asks – How does the $$ flow? INSTITUTIONAL INVESTORS Venture Capital Advice Investment Banks Private Equity A B C Execution COMPANIES Accounting Law Consulting Firms Firms Firms
  7. 7. Why is this important to me?  Deal Flow: Understand who is buying services from whom – which way is the money flowing and how can your fundraising benefit?  There is currently an abundance of capital to invest  Important to be able to use this “language” accurately in appealing to these professionals
  8. 8. Glossary: n. Wall Street terminology for dummies  Analyst: an employee of a bank, brokerage, advisor or mutual fund who studies companies and makes buy and sell recommendations, often specializing in a single sector or industry.  Arbitrage: attempting to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms.  Broker: An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor; the role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.  Chinese Wall: a term used to describe procedures enforced within a securities firm that separate the firm’s departments to restrict access to non-public, material information, in order to avoid the illegal use of inside information.  Debt (bonds, bank loans): a liability or obligation in the form of bonds, loan notes, or mortgages, owed to another person or persons and required to be paid by a specified date (maturity).  Due Diligence: the process of investigation, preformed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.
  9. 9. Glossary cont.: all of the words I’m supposed to know but have been too embarrassed to ask for their meaning  Equity: ownership interest in a corporation in the form of common stock or preferred stock.  Futures: a standardized, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date. Unlike options, futures convey an obligation to buy.  Hedge Fund: An aggressively managed portfolio taking positions on safe and speculative opportunities. Most hedge funds are limited to a maximum of 100 investors. For the most part, hedge funds are unregulated because it is assumed the people investing in these are very sophisticated and wealthy.  Leveraged Buyout (LBO): Takeover of a company or controlling interest in a company, using a significant amount of borrowed money, usually 70% or more of the total purchase.  Merger: the combining of two or more entities into one, though a purchase acquisition or a pooling of interests.  Options: the right, but not the obligation to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specific price (the strike price) during a specified period of time.
  10. 10. Glossary cont.  Securities and Exchange Commission (SEC): the primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure, and to protect investors against fraudulent and manipulative practices in the securities markets.  Strategic Acquisition: an acquisition that is made because of operational benefits that will result from the two companies working as one, thereby leading to greater profits than the two would earn separately.  Venture Capital: Money made available for startup firms and small businesses with exceptional growth potential. Managerial and technical expertise are often provided as well. The downside for entrepreneurs is that venture capitalists usually receive a say in the major decisions of the company in addition to a portion of the equity.
  11. 11. Resources  http://www.investopedia.com  http://www.investorwords.com  http://www.wallstreetjournal.com