Which statement regarding the underwriting process and over-the-counter (OTC) markets is CORRECT?

The primary function of underwriting is to facilitate the process of raising capital for corporations or governments. Investment bankers, acting as underwriters, purchase the new securities from the issuer and resell them to the public or place them with institutional investors. This process transfers the risk of selling the securities from the issuer to the investment bank and provides the issuer with the needed capital. This is a core activity in the primary market, where new securities are created and sold for the first time.

A. A new issue is listed on an exchange or traded on an OTC market after the underwriting process, not both, and not during.
C. Securities are sold to investors first through the underwriting process; only after this initial sale do they begin trading on an exchange or OTC market.
D. Listing and disclosure standards for major stock exchanges are significantly more stringent than for securities traded on OTC markets.

1. IFSE Institute, "Canadian Investment Funds Course (CIFC)," Part 1, Module 2, Chapter 4: The Structure of the Canadian Financial Marketplace. This chapter describes the roles of investment dealers in underwriting and the distinction between primary and secondary markets.

2. Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2018). Fundamentals of Corporate Finance (12th ed.). McGraw-Hill Education. Chapter 15, "Raising Capital," details the underwriting process and the role of investment banks.