Financial Glossary: ADRs (American Depositary Receipts)


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ADRs (American Depositary Receipts)

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ADRs (American Depositary Receipts)

ADRs (American Depositary Receipts)

ADRs (American Depositary Receipts) are tradable certificates in registered form, issued in the U.S. by a U.S. bank, which certifies that a specific number of foreign shares have been deposited with an overseas branch of the bank - or another financial Institution acting as a Custodian in the certificate's country of origin.

ADRs can be either sponsored or unsponsored. Unsponsored ADRs are issued by a depository for already outstanding foreign shares without an agreement with the issuer of the shares. Since 1983, however, unsponsored ADRs may only be issued if the issuer of the Underlying shares has agreed to supply certain information about itself to the Securities and Exchange Commission (SEC).

Sponsored ADRs are issued by a depository by arrangement with the issuer and with its financial support for shares which are already outstanding or for shares issued specifically for an offering of ADRs in the U.S.

ADRs provide a practical opportunity for investors who want to invest in the shares of a foreign Corporation to buy, hold and sell their interests in these foreign securities without having to take physical possession of the securities, while receiving dividends and exercising voting rights.

A Holder of ADRs can at any time request the Underlying shares. Conversely, ADRs enable foreign corporations with shares that have not been admitted to a U.S. stock Exchange to obtain access to U.S. public capital markets.

Usually, only shares traded on a recognized foreign stock Exchange are represented by ADRs.

Posted by Institute for International Research, Opal Financial Group

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