The Securities and Exchange Commission today announced that Merrill Lynch, Pierce, Fenner & Smith Incorporated will pay over $8 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs).ADRs – U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADR represents. The SEC’s order found that Merrill Lynch improperly borrowed pre-released ADRs from other brokers when Merrill Lynch should have known that those brokers – middlemen who obtained pre-released ADRs from depositaries – did not own the…
Read more detail on Recent Banking and Finance Law posts –
