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Series 79 practice questioneasyEquity and Debt Capital Markets

What is the primary difference between equity capital markets (ECM) and debt capital markets (DCM)?

  1. AECM deals with offerings of ownership securities (stocks) while DCM deals with offerings of debt instruments (bonds, notes)✓ Correct answer
  2. BECM is for domestic offerings and DCM is for international offerings
  3. CECM involves private placements and DCM involves public offerings
  4. DECM is regulated by the SEC and DCM is regulated by FINRA
Explanation

Why A — ECM deals with offerings of ownership securities (stocks) while DCM deals with offerings of debt instruments (bonds, notes)

Equity capital markets (ECM) focuses on the issuance and trading of ownership securities, including common stock, preferred stock, and equity-linked securities such as convertible bonds. Debt capital markets (DCM) focuses on the issuance of debt instruments such as investment-grade bonds, high-yield bonds, loans, and other fixed-income securities. Both ECM and DCM transactions can be domestic or international, public or private, and are regulated by both the SEC and FINRA. Investment banks typically have separate ECM and DCM teams given the different skill sets and investor bases involved.

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