Rule 14 of 14 in this unit2.1.1
2.1.1 Equity Securities
SIE outline 2.1.1
Voting Is a Term, Not an Entitlement
An ADR conveys an economic interest by construction. Governance rights are whatever the deposit agreement provides. The SEC's bulletin describes the sponsored programme as one where the non-U.S. company "enters into an agreement directly with the U.S. depositary bank to arrange for recordkeeping, forwarding of shareholder communications, payment of dividends, and other services": and an unsponsored programme as one "set up without the cooperation of the non-U.S. company", so no such agreement with the issuer exists. NOT "ADR holders never have voting rights." The accurate statement is that voting is not automatic: it exists only where the deposit agreement provides for it, and an unsponsored programme has no agreement with the company at all.
The method for this kind of question
- 1h45m ÷ 80 items = 78.75 seconds per item. A classification item here should cost about 40.
- Stop hunting for a rule. Every fact in this lesson is a term in a document, so the stem must hand it to you.
- Arrears: count the missed years, then ADD the year now due. Dropping that last step is the classic error.
- Rights vs warrants: either axis classifies it. Weeks and below-market → right. Years and above-market → warrant.
- "Attached to the bonds" is a warrant, every time.
- An ADR trading in dollars does NOT remove currency risk: the dollar price is the foreign price after the exchange rate.
- Next: SIE Practice Quiz #5: Equity Securities, every answer explained.
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