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Getting ready

Philippe Espinasse

in IPO: A Global Guide

This chapter sets out the preparatory work needed for an initial public offering and explains the roles played by different professionals, including the company going public, the investment bank, and ... More

This chapter sets out the preparatory work needed for an initial public offering and explains the roles played by different professionals, including the company going public, the investment bank, and legal, accounting and other professionals. It also explains different forms of IPOs, the complex process of drawing up a prospectus, and the treatment of different categories of investors.Less

Charles E. Merrill: 1885–1956: The People’s Capitalist

Edward Morris

in Wall Streeters: The Creators and Corruptors of American Finance

The chapter describes the life of Charles Merrill and the formation of Merrill Lynch.

Leviathan and the Investment Banks

Alan D. Morrison and William J. Wilhelm Jr.

in Investment Banking: Institutions, Politics, and Law

This chapter traces developments in the investment banking industry in the first half of the 20th century. It discusses the contemporary reasoning that led away from the minimal state and towards a ... More

This chapter traces developments in the investment banking industry in the first half of the 20th century. It discusses the contemporary reasoning that led away from the minimal state and towards a conception of the State as an ‘enterprise association’, in which the law serves ends rather than means. It argues that this thinking engendered a hostility towards investment banks, which was reflected in the New Deal legislation of the 1930s. Hence, it is argued that although the financing of two world wars, the emergence of retail securities investors, and the great depression of the 1920s all affected the industrial organization of investment banks, the most important influences upon the industry at this time were legal and political. The chapter then follows the legislative trail, culminating in the failed 1947-1953 anti-trust suit (US v. Morgan et. al.) that the Justice Department in the US brought against seventeen investment banks.Less

Mutual Fund Disclosure and Related Fund Investor Protection Features

Joseph A. Franco

in Mutual Funds and Exchange-Traded Funds: Building Blocks to Wealth

This chapter discusses the principal features of mutual fund disclosure regulation in the United States and the challenges faced by the SEC in designing a disclosure regime that meets the needs of ... More

This chapter discusses the principal features of mutual fund disclosure regulation in the United States and the challenges faced by the SEC in designing a disclosure regime that meets the needs of retail investors and promotes investor protection. The chapter notes that, unlike conventional public companies, mutual funds are engaged in continuous offerings of securities to the public. As a result, fund disclosure, including fund advertising, is subject to ongoing regulatory requirements in terms of format and content, especially as it relates to disclosure of fund performance. The chapter then explains why regulators have been successful in making disclosure easier to understand, but face far greater challenges in designing disclosure requirements that promote rational investment decision-making given well-established behavioral biases of retail investors.Less

When, Why, and How Do Mutual Fund Investors Use Financial Advisers?

Sarah A. Holden

in The Market for Retirement Financial Advice

More than four in ten US households own mutual funds and half of mutual fund-owning households indicate they have ongoing advisory relationships. Financial advisers provide a wide range of investment ... More

More than four in ten US households own mutual funds and half of mutual fund-owning households indicate they have ongoing advisory relationships. Financial advisers provide a wide range of investment and planning services in addition to helping investors select and purchase mutual fund shares. Using a variety of household surveys, this chapter delves into when, why, and how mutual fund investors interact with financial advisers. For example, the research explores whether certain ‘trigger’ events prompt fund investors to seek professional financial advice. Investors typically receive multiple services and choose to work with financial advisers because advisers have expertise in areas investors do not. In addition, investors interact with advisers in a variety of ways (e.g., collaboratively versus the adviser or investor taking the lead; investor conducting their own research). This chapter also analyzes whether certain mutual fund investors are more likely than others to work with financial advisers.Less

Crowdfunding in social finance

Othmar M. Lehner

in Social Finance

This chapter examines crowdfunding, particularly as it relates to financing social enterprise. It suggests that crowdfunding offers a real opportunity to connect mass retail investors with social ... More

This chapter examines crowdfunding, particularly as it relates to financing social enterprise. It suggests that crowdfunding offers a real opportunity to connect mass retail investors with social enterprise, and it highlights the significant research gaps to which this development has given rise. The chapter starts by examining various business models for crowdfunding and these are set out in detail. Then it explores debt- and equity-based models of crowdfunding in relation to social finance. Each model is considered in turn. Finally, the chapter proposes a range of future research themes and topics for scholarship concerned with crowdfunding in a social enterprise context.Less

Regulating Consumer Finance

John Armour, Dan Awrey, Paul Davies, Luca Enriques, Jeffrey N. Gordon, Colin Mayer, and Jennifer Payne

in Principles of Financial Regulation

From an economic perspective, two related justifications can be distinguished for regulatory intervention vis-à-vis consumers or retail investors: asymmetries of information between consumers and the ... More

From an economic perspective, two related justifications can be distinguished for regulatory intervention vis-à-vis consumers or retail investors: asymmetries of information between consumers and the persons with whom they transact, and the behavioural characteristics of consumers. It is now widely understood that individual cognitive processing has limited capacity, and that the human brain deploys many mechanisms to economize upon such processing. While saving time, that also generates errors. The propensity of individuals to make such errors can provide a rationale for regulation. However, this rationale also requires careful calibration. If consumers’ behaviour is distorted by such biases, it may be hard to discern their ‘true’ preferences. Consequently, there is a risk that well-meaning regulatory intervention may actually make consumers worse off. The most promising case for intervention focuses on the activities of financial firms given the presence of asymmetric information and/or behavioural biases on the part of consumers.Less

Uses of ETFs

Ananth N. Madhavan

in Exchange-Traded Funds and the New Dynamics of Investing

This chapter covers how practitioners use ETFs for a diverse set of investment objectives. Both retail or institutional investors are increasingly using ETFs as vehicles for gaining exposure to broad ... More

This chapter covers how practitioners use ETFs for a diverse set of investment objectives. Both retail or institutional investors are increasingly using ETFs as vehicles for gaining exposure to broad stock and bond indexes as part of their core asset allocation. More recently, investors use ETFs to express tactical bets where they seek precision exposures to certain countries, regions, sectors, industries, and so on. Institutions are also adopting ETFs for a variety of purposes including cash management, as a liquidity sleeve, in portfolio transitions, and for tactical allocation. One of the more interesting recent developments is the use of ETFs instead of futures contracts to gain exposure to a broad index.Less