SIE Exam Question 502: Answer and Explanation

Question: 502

Which of the following is not true regarding American Depositary Receipts (ADRs)?

• A. Each ADR represents 100 shares of foreign stock, and the ADR holder may request delivery of the foreign shares.
• B. They are receipts of ownership of foreign shares being held abroad in a U.S. bank.
• C. The foreign country may issue restrictions on the foreign ownership of stock.
• D. ADR holders have the right to vote and to receive dividends that the foreign corporation declares for shareholders.

Correct Answer: A

Explanation:

A: Each ADR represents between one to 10 shares, and ADR holders have the right to vote and receive dividends. Foreign governments put restrictions on the foreign ownership of stock from time to time.