JPMorgan To Settle SEC Claims About ADRs -- WSJ
December 27 2018 - 2:02AM
Dow Jones News
By Gabriel T. Rubin and Samuel Rubenfeld
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 27, 2018).
JPMorgan Chase & Co. agreed to pay $135 million to settle
claims that it improperly handled thousands of transactions
involving foreign companies' shares, the latest penalty in a
wide-ranging probe of misconduct in the market.
JPMorgan improperly provided American depositary receipts for
foreign shares that weren't in the bank's custody, which led the
bank to inflate the number of a foreign company's tradable shares,
the Securities and Exchange Commission said Wednesday. The conduct
cited by regulators occurred between 2011 and early 2015 in the
market for ADRs, a securities product the bank created nearly a
century ago.
"With these charges against JPMorgan, the SEC has now held all
four depositary banks accountable for their fraudulent issuances of
ADRs into an unsuspecting market," said Sanjay Wadhwa, an official
in the SEC's New York office.
"We're pleased to have resolved this matter, which is related to
an industry practice we voluntarily ended a few years ago," said
JPMorgan spokesman Brian Marchiony. The bank, which cooperated with
the investigation, didn't admit or deny the SEC's findings.
The SEC has been looking into whether big banks have been
mishandling securities in the ADR market in recent years, and
Wednesday's settlement with JPMorgan is the eighth action taken as
part of the probe.
In the past six months, the SEC has also announced ADR-related
settlements with three other banks: BNY Mellon, which agreed to pay
more than $54 million; Citigroup Inc., which agreed to pay more
than $38 million; and Deutsche Bank AG, which agreed to pay more
than $75 million.
The SEC said an investigation into broker-dealer conduct in the
market is continuing.
Created by J.P. Morgan in 1927, ADRs were designed to help
investors avoid many of the complexities and costs of directly
owning shares overseas while helping foreign companies widen their
investor base in the U.S.
Foreign companies transfer shares to the banks, which use them
to back corresponding securities issued to U.S. investors. The
securities track the price of the underlying shares. Brokers who
sell or transfer ADRs are typically responsible for ensuring that a
matching number of foreign shares have been deposited with a
custodian.
More than 74 billion depositary receipts, worth more than $2
trillion, were traded in the first half of 2018, according to data
from Bank of New York Mellon Corp.
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com and Samuel
Rubenfeld at samuel.rubenfeld@wsj.com
(END) Dow Jones Newswires
December 27, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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