- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 4. Overview of Equity Securities
- Subject 4. Investing in Non-Domestic Equity Securities
CFA Practice Question
Which of the following statements is the LEAST ACCURATE with respect to American depositary receipts (ADRs)?
B. Level 2 ADRs may only be traded on a U.S. exchange or quoted on Nasdaq.
C. Level 3 ADRs may raise capital in the U.S. but only through a private placement.
D. ADRs do not necessarily require the underlying company's approval in order to be traded.
A. Level 1 ADRs may only be traded over the counter.
B. Level 2 ADRs may only be traded on a U.S. exchange or quoted on Nasdaq.
C. Level 3 ADRs may raise capital in the U.S. but only through a private placement.
D. ADRs do not necessarily require the underlying company's approval in order to be traded.
Correct Answer: C
Level 3 ADRs meet all SEC requirements and may therefore raise capital in the U.S. through any of the exchanges.
User Contributed Comments 5
| User | Comment |
|---|---|
| taowu | What about B? |
| actiger | Quoted on NASDAQ means traded on OTC. B is an correct statement which should not be the answer. |
| dblueroom | Thanks actiger! |
| CJPerugini | Question is asking for LEAST accurate. C is correct. |
| khalifa92 | ADR 1 = OTC ADR 2&3 = traded on US exchange & NASDAQ ADR 3 = may raise capital through IPO Rule 144A (unlisted) = private placements |