JPMorgan to Pay $135M for Mishandling ADRs

"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," according to Sanjay Wadhwa, senior associate director of the SEC's New York office.  "Our investigation continues into brokerage firms that profited by making use of these improperly issued ADRs."

When pre-releasing ADRs — which are U.S. securities that represent foreign shares of a foreign company — brokers must have an agreement with a depositary bank and the broker or client must own the number of shares that matches the number of shares represented by the ADR.

This is the eighth action against a bank or broker, and fourth action against a depositary bank, resulting from the SEC's ongoing investigation into abusive ADR pre-release practices. For more details about ADRs, see this SEC Investor Bulletin.

Without admitting or denying the SEC's findings, JPMorgan agreed to pay disgorgement of more than $71 million, as well as $14.4 million for prejudgment interest and a $49.7 million penalty.  The SEC says the bank cooperated with the investigation and remedial acts.

"We're pleased to have resolved this matter, which is related to an industry practice we voluntarily ended a few years ago," JPMorgan said in a statement shared with ThinkAdvisor.

—Related on ThinkAdvisor:

• SEC Hits BNY Mellon for $54M Over Improper ADR Handling
• SEC Charges Advisor With Scamming Out of Millions: Enforcement
• Deutsche Bank Units to Pay $75M  to SEC Over ADRs