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SEC: Deutsche Bank to pay $75M for improper handling of ADRs

Jaclyn Jaeger | July 23, 2018

The Securities and Exchange Commission on July 20 announced that two U.S.-based subsidiaries of Deutsche Bank AG will pay nearly $75 million to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs).

The case is the result of a continuing industry-wide SEC investigation into abuses involving pre-released ADRs. In proceedings against Deutsche Bank Trust Co. Americas (DBTCA), a depositary bank, and Deutsche Bank Securities (DBS), a registered broker-dealer, the SEC found that their misconduct allowed pre-released ADRs to be used for abusive practices, including inappropriate short-selling and inappropriate profiting around dividend payouts.

ADRs, U.S. securities that represent foreign shares of a foreign company, require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided brokers receiving them have an...

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