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Basic Question 2 of 9
American ADRs are shares issued by ______.
B. foreign banks that represent indirect ownership of shares in a foreign company
C. U.S. banks that represent direct ownership of shares in a foreign company
A. U.S. banks that represent indirect ownership of shares in a foreign company
B. foreign banks that represent indirect ownership of shares in a foreign company
C. U.S. banks that represent direct ownership of shares in a foreign company
User Contributed Comments 6
| User | Comment |
|---|---|
| actiger | "indirect" ownership |
| dblueroom | i guess because some cant exercise voting right and full benefit of a share. |
| joywind | the nature of the shares is "held in deposit" so the bank is not the direct owner of those shares. |
| gulfa99 | in other words, us banks act as custodian |
| CFAToad | I believe indirect refers to the depositor, not the bank. It is my understanding that the fund or account is the direct owner, a prerequisite to offer participation in gains and losses. |
| thevinu | Very good question. From what i understand, if a U.S. bank had direct ownership of shares, it wouldn't have to be an ADR in the first place. It's an ADR because the company is not considered to trade as per U.S. regulations whereas if a U.S. bank had direct ownership of shares, it would already be considered a firm to trade within U.S. regs and wouldn't need to issue an ADR, instead directly get involved with the markets. |
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Learning Outcome Statements
describe methods for investing in non-domestic equity securities
CFA® 2025 Level I Curriculum, Volume 3, Module 4.