Financial sectors include the institutions and regulators that provide the framework to facilitate lending and borrowing. These activities can be classified into different sectors, depending on the type of transactions they facilitate:

Non-Depository Financial Institutions
Non-depository financial institutions are intermediaries that do not accept deposits, but provide funds to consumers and businesses. Examples of these organizations include consumer loan companies, trust companies, mortgage loan companies, credit counseling agencies, and finance companies.
Unlike depository institutions, non-depository financial institutions are regulated only by the U.S. has been done at the state level, but increased regulation of these institutions at the national level is currently under discussion. Especially in case of failure of large non-depository financial institutions. Organizations One such failure is CIT Group Inc. It belonged to a commercial and consumer finance company, which filed for bankruptcy in 2009.
Non-Depository Financial Institutions are also referred to as Non-Bank Financial Institutions (NBFI). The distinction of these types of companies as financial institutions began with the Annunzio-Wylie Anti-Money Laundering Act of 1992, which expanded the definition of a financial institution beyond deposit-taking institutions.


Investment companies
Investment companies also known as asset management companies. They manage the funds of individuals, businesses, and state and local governments and are reimbursed for the services they charge. Fees are linked to the amount managed for the client and in some cases to the performance of the assets managed. Some asset management companies are subsidiaries of insurance companies, commercial banks and investment banking firms.
Account types, clients, and lines of business for asset management companies include:
Separately managed accounts
Instead of investing directly in stocks or bonds, or through alternatives such as mutual funds, ETFs, or hedge funds, asset management companies offer individual and institutional investors the opportunity to invest in an individually managed account, also known as an individually managed account. In such accounts, the investments selected by the asset manager are customized according to the investor's objectives. While separately managed accounts offer asset management clients an investment vehicle that overcomes all the limitations of RICs, they are more expensive than RICs in terms of fees.


Private Placement of Securities
As an alternative to issuing new securities in the public market, a company may issue securities through private placement to limited institutional investors such as insurance companies, investment companies and pension funds. Private placement offerings are distinguished by type. Non-Rule 144A Offerings and Rule 144A Offerings Rule 144A offerings are underwritten by investment bankers.

Trading Securities
An obvious function of investment banks is to provide transaction services for clients. Revenue is generated on transactions in which the investment bank acts as an agent or broker in the form of commission. In such transactions, the investment bank does not take a position in the transaction, which means it does not put its own capital at risk. In other transactions an investment bank may act as a market maker, putting its own capital at risk.
The price at which the investment bank sells the security and the price paid for the security is called the bid-ask spread.
Appreciation in value of securities held in inventory means that revenue will naturally decrease if the value of the securities falls.
Apart from dealing in the secondary market for clients as well as market making in the secondary market as well as investment banks do proprietary trading called prop trading. In this activity, investment bankers hold some of the company's capital to bet on movements in financial instrument prices, interest rates, or foreign currencies.


Merchant Banking
A merchant banking activity is one in which an investment bank raises its own capital either as a borrower or to take an equity stake. Investment banks have departments or groups dedicated to merchant banking. In the case of equity investments this could be in the form of a series of private equity funds.

Securities, finance and prime brokerage services
Investment banks have clients who, as part of their investment strategy, either need to borrow funds to buy securities or borrow securities to short sell or short sell securities. The standard mechanism for borrowing funds in the securities market is referred to as repo through repurchase agreements rather than bank borrowing. Where a repo is a collateralized loan, the collateral is a purchased security. Investment banks earn interest on repo transactions. A customer can borrow securities in a transaction known as a securities lending transaction. In such transactions the security lender earns a fee for lending the securities. The activity of borrowing or lending securities is called securities finance.
Investment banks can offer packages of services to hedge funds and large institutional investors. This package of services, referred to as prime brokerage, includes the securities finance we just described as well as global custody, operational support and risk management systems.

Asset Management
An investment bank may have one or more subsidiaries, which manage assets for clients such as insurance companies, foundations, corporates, endowments, public pension funds and high net worth individuals. These asset management divisions can also manage mutual funds and hedge funds. Asset management generates fee income based on a percentage of assets under management.

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