Firms engaged in this business became known as investment banks. Firms like JP Morgan didn't limit themselves to investment banking, but established themselves in a variety of other financial businesses including lending and deposit taking (i.e. commercial banking). This resulted in the separation of investment banking from commercial banking (the Glass-Steagall Act of 1933). Many of the large global firms today conduct both merchant banking (private equity) and investment banking.
In the United States, investment banks operate according to legislation enacted at the time of Glass-Steagall. The Securities Act of 1933 became a blueprint for how investment banks underwrite securities in the public markets. The 1934 Securities Exchange Act addressed securities exchanges and broker-dealer organizations. The 1940 Investment Company Act and 1940 Investment Advisors Act established regulations for fiduciaries, such as mutual funds, private money managers and registered investment advisors. The new issue market is called the primary market. Investment banking is fraught with potential conflicts of interest. When a firm in which the main line of business is sell side, investment banking acquires a buy-side asset manager, and these incentives can be at odds.
Regulations mandate that banks enforce a separation between research and banking, popularly referred to as a Chinese Wall. In reality, however, many firms have tied research analysts' compensation to investment banking profitability. A discussion on investment banking wouldn't be complete without addressing the enormous sums of money that investment bankers are paid.