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CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Institutions

Which feature is generally true of a sponsored ADR programme compared with an unsponsored one?

In a sponsored ADR programme, the issuing company signs a deposit agreement with a single depository and takes part directly, usually bearing the costs. In an unsponsored programme the depository creates receipts without the company's participation, so sponsorship is what differs.

  1. AThe issuing company enters a deposit agreement with a single depository and participates directly in the programmeCorrect
  2. BThe depository issues receipts without any involvement of the company
  3. CADRs can be created only for debt securities
  4. DThe shares underlying are never held by a custodian

Explanation

In a sponsored ADR programme the foreign issuer signs a deposit agreement with one depository and takes part in the programme, bearing its costs. In an unsponsored programme, depositories issue receipts without the issuer's involvement. Hence the other options are incorrect.

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