General Securities Representative (Series 7) Practice Exam – Your All-in-One Guide to Exam Success!

The correct response is that the indenture agreement outlines the rights and responsibilities of the issuer and the investor. An indenture is a formal legal agreement between a bond issuer and bondholders. It specifies important terms, including the obligations of the issuer to pay interest and principal, as well as any covenants or requirements that the issuer must follow.

The indenture also defines the rights of the bondholders in various situations, such as default and bankruptcy, giving investors a clear understanding of what they can expect from their investment and what rights they hold if the issuer does not meet its obligations. This comprehensive nature of the indenture ensures transparency and protection for investors.

The prospectus, while it provides essential information about the offering and its terms to potential investors, does not formally outline the legal rights and responsibilities between the parties. The underwriting agreement typically details terms between the issuer and the underwriters selling the securities, and the subscription agreement is more about the agreement to purchase shares rather than outlining ongoing rights and responsibilities.