SEC fines Chinese bank $42 million for mishandling ADRs

MarketWatch | Jun 14, 2019 at 4:27 PM
  • The Securities and Exchange Commission fined Industrial and Commercial Bank of China Financial Services LLC, a wholly-owned subsidiary of Industrial and Commercial Bank of China Limited IDCBF, +2.10% $42 million on Friday for alleged improper handling of “pre-released” American Depositary Receipts, or ADRs.
  • 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 ADRs represent.
  • The SEC’s order alleged that Industrial and Commercial Bank of China improperly obtained pre-released ADRs from depositary banks when ICBCFS should have known that neither the firm nor its customers owned the foreign shares needed to support those ADRs.