What is the difference in obligations between primary market and secondary market transactions?

• A. Primary market involves underwriting new issues with issuer oversight; secondary market involves trading outstanding issues with ongoing disclosure
• B. Secondary market involves underwriting new issues with issuer oversight; primary market involves trading outstanding issues with ongoing disclosure
• C. There is no difference in obligations
• D. Only the primary market has disclosure requirements

Answer: (A)

The key idea is who bears the information responsibilities when a security is issued versus traded. In the primary market, a new issue is brought to investors through underwriters. They conduct due diligence, structure the deal, and prepare the official statement, while the issuer provides the core information and remains responsible for it. This is why issuer oversight is highlighted in the primary market.

In the secondary market, investors trade securities that have already been issued. There isn’t a new underwriting or official statement process. Instead, there are ongoing disclosure obligations that continue to apply to the issuer so that investors have current information about the security and the issuer, even though the trading is among investors and facilitated by broker-dealers.

So the first description correctly matches the distinction: underwriting new issues with issuer oversight in the primary market, versus trading outstanding issues with ongoing (continuing) disclosure in the secondary market.