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CFA Level I · CFA Level I Exam · Equity Jurisdictions, Classes, and the Voting Process

An investor wants to hold shares of a company that is incorporated and has its primary listing in a country other than her own. Which of the following instruments would most likely allow her to gain exposure through her home market without trading directly on the foreign exchange?

A depositary receipt is the most likely choice. It is issued by a depositary bank and trades in the investor's home market while representing shares in a foreign company. Rights issues and stock dividends are corporate actions for existing holders and give no cross-border access.

  1. AA depositary receiptCorrect
  2. BA rights issue
  3. CA stock dividend

Explanation

Depositary receipts are issued by a depositary bank and trade in the investor's local market, representing shares of a foreign company. A rights issue and a stock dividend are corporate actions offered to existing shareholders and do not provide cross-border access.

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