JPMorgan paying $185m to settle SEC claims about handling of ADRs

JPMorgan improperly provided American depository receipts to brokers when neither the brokers nor their clients held shares in foreign firms that were required to support such transactions, said the SEC.
JPMorgan improperly provided American depository receipts to brokers when neither the brokers nor their clients held shares in foreign firms that were required to support such transactions, said the SEC.PHOTO: REUTERS

WASHINGTON • JPMorgan Chase & Co will pay US$135 million (S$185 million) to settle Securities and Exchange Commission allegations that it mishandled US securities that represent shares of foreign companies, the latest bank fined in an industry crackdown on the practice.

The bank improperly provided what's known as American depository receipts (ADRs) to brokers when neither the brokers nor their clients held shares in foreign companies that were required to support such transactions, the SEC said in a Wednesday statement.

Without admitting or denying the claims, JPMorgan agreed to pay a US$49.7 million fine and US$85.4 million in disgorgement and interest.

Wall Street's main regulator has made ADR sales a focus of its enforcement efforts.

Last month, Citigroup Inc agreed to pay US$38.7 million to settle similar SEC charges and Deutsche Bank agreed to pay about US$75 million in July.

The SEC said on Wednesday that the JPMorgan settlement was the eighth enforcement action against a firm that stemmed from the regulator's ongoing probe into "abusive ADR pre-release practices".

"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 Mr Sanjay Wadhwa, senior associate director of the SEC's New York regional office.

"Our investigation continues into brokerage firms that profited by making use of these improperly issued ADRs."

The SEC said the transactions inflated the amount of securities tied to foreign companies that were available in the market, potentially enabling inappropriate short selling and other abusive practices.

"We're pleased to have resolved this matter, which is related to an industry practice we voluntarily ended a few years ago," said Mr Andrew Gray, a JPMorgan spokesman.

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A version of this article appeared in the print edition of The Straits Times on December 28, 2018, with the headline 'JPMorgan paying $185m to settle SEC claims about handling of ADRs'. Print Edition | Subscribe