In the three months after October 2008, more than 800
unsponsored American depository receipt (ADR) programmes were
set up by US banks. Since then the number has continued to
grow, and the trend shows no sign of waning. A US Securities
and Exchanges Commission (SEC) rule change to the terms of the
Rule 12g3-2(b) exemption has made it easier for banks to set up
ADR facilities without informing the issuer, and with investor
appetite proving healthy, depositary banks have jumped to take
advantage of the change.
But panellists on the IFLR and Latham & Watkins web
seminar on unsponsored ADR programmes agreed that the
liberalised system was not without its downside, and worried
listeners sent in questions raising their concerns about
liability, insider trading and how they could protect
themselves from this practice.
No issuer involvement An ADR programme is set up by a bank
to allow investors to...