SIE practice questionhardADR — Sponsored vs Unsponsored
Which statement about sponsored vs. unsponsored ADRs is TRUE?
- AThere is no difference between sponsored and unsponsored ADRs
- BUnsponsored ADRs are required to file with the SEC and meet full reporting requirements
- CUnsponsored ADRs have a direct agreement between the foreign company and the U.S. depositary bank
- DSponsored ADRs may trade on major U.S. exchanges, while unsponsored ADRs generally trade OTC✓ Correct answer
Explanation
Why D — Sponsored ADRs may trade on major U.S. exchanges, while unsponsored ADRs generally trade OTC
Sponsored ADRs involve a direct agreement between the foreign company and the depositary bank, allowing them to trade on major exchanges (NYSE, NASDAQ). Unsponsored ADRs are created without the foreign company's involvement and typically trade only OTC (over-the-counter). Unsponsored ADRs generally have less disclosure and fewer reporting requirements.
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