Chapter Four
Supervision of Investment Banking and Research
(32 questions on the exam)
The securities industry is fundamentally about raising and investing money. When a company wants to raise money, it has two options. First, it can sell partial ownership in the business by issuing equal units of ownership called “shares” or “stock” (the terms are used interchangeably and mean the same thing). Investors buy shares and become partial owners of the company. The more shares investors purchase, the more of the company they own. Raising money this way is called equity financing, and the purchased shares or stock are called equity securities. In accounting terms, “equity” means what is left over after all debts have been paid. This is the portion that is owned outright, without debt. So eq