KPMG Forms Investment Banking Firm : Finance: Bix Six accounting firm is first to enter Wall Street domain; others are expected to follow.

The nation’s second-largest accounting firm has joined an invasion by banks and insurance companies into what was once the exclusive domain of Wall Street firms.

On Friday, KPMG Peat Marwick announced an aggressive expansion into the investment banking business, saying it has formed a separate company to advise corporations on financial matters, help arrange mergers and privately place securities.

Experts said the steps are likely to be imitated by other Big Six accounting firms. So far accounting firms have refrained from activities that could be seen as prejudicing the objective financial audits they provide to companies. But KPMG says it has figured out a way to address those concerns. The newly created company, called KPMG Baymark, will be an independent business not owned by KPMG, KPMG corporate finance head Stephen Blum said.

KPMG will not share in any revenue or income from KPMG Baymark.

“Because KPMG doesn’t own any of KPMG Baymark, KPMG Baymark isn’t subject to any of the regulatory restraints,” Blum said.

Despite KPMG Baymark’s independence, KPMG says it stands to benefit from the alliance by being able to offer clients one-stop shopping for services ranging from financial advice to private placements of securities. Another potential benefit is that KPMG Baymark is expected to occasionally hire KPMG corporate finance staff members for advisory projects.

Earlier this week, the National Assn. of Securities Dealers, a securities industry self-regulatory group, gave approval to KPMG Baymark as a broker-dealer.

KPMG, the Amsterdam-based parent of U.S. unit KPMG Peat Marwick, was already the No. 2 adviser on mergers and acquisitions worldwide, after Goldman, Sachs & Co., in the first half of 1995, according to Securities Data Co. But the new alliance will allow Baymark to charge commissions, instead of straight fees, for investment banking business. Commissions are potentially more lucrative because they go up as the value of a deal increases.

The alliance also allows Baymark to privately place bonds and stocks on behalf of KPMG clients, particularly for small and mid-size companies. But Baymark will not underwrite any securities for public offerings.

“We often see companies suffer when they use an uncoordinated string of management consultants, accountants, tax advisers and investment bankers,” Jon Madonna, chairman of KPMG Peat Marwick, said in the company’s announcement.

Experts say other accounting firms are likely to follow suit, accompanying a recent trend by banks and insurance companies to handle businesses historically reserved for Wall Street investment banks.

“This is probably something more [accounting] firms will look at over the next three to five years,” said Arthur Bowman, editor of Bowman’s Accounting Report, an Atlanta-based newsletter covering the accounting industry.

Blum said the Securities and Exchange Commission had no objections when KPMG filed its plan with the federal securities industry watchdog agency. An official in the SEC’s office of the chief accountant did not return a phone call seeking comment.