SIE (Securities Industry Essentials) Practice Exam

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What is the essential difference between a primary distribution and a secondary distribution?

The volume of shares traded
The type of securities exchanged
A primary distribution involves a sale of newly issued shares by the issuer, while a secondary distribution involves the sale of already issued and outstanding shares
The geographical market in which they are sold

The correct answer is: A primary distribution involves a sale of newly issued shares by the issuer, while a secondary distribution involves the sale of already issued and outstanding shares

A primary distribution involves a sale of newly issued shares by the issuer, while a secondary distribution involves the sale of already issued and outstanding shares. This is the essential difference between the two types of distributions. Options A and D are incorrect because they do not accurately describe the difference between primary and secondary distributions. Option B may seem like a plausible answer, but it does not fully capture the key distinction between the two types of distributions.