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JPMorgan Settles Improper Handling of ADRs Charges for $135M

Zacks Equity Research

JPMorgan JPM became the latest bank to be fined by the Securities and Exchange Commission (“SEC”) for allegations related to improper handling of American Depositary Receipts (ADRs). The company will be paying $135.1 million to settle the charges.

Of the total amount, JPMorgan will pay $71 million in disgorgement, $14.4 million in prejudgment interest and the remaining $49.7 million in fine. Notably, the company neither admitted nor denied the SEC findings.

Andrew Gray, a JPMorgan spokesman said, “We’re pleased to have resolved this matter, which is related to an industry practice we voluntarily ended a few years ago.” In August, the company disclosed that it was under investigation for the handling of ADRs.

Per the findings of the SEC, JPMorgan wrongly provided ADRs to brokers in several pre-release transactions when both brokers and their clients did not have the requisite number of foreign shares needed to support new ADRs. This inflated the number of foreign company’s tradeable shares, which can result in inappropriate short-selling and dividend arbitrage.

Notably, this improper conduct occurred between 2011 and 2015.

Sanjay Wadhwa, senior associate director of the SEC’s New York regional office said, “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. Our investigation continues into brokerage firms that profited by making use of these improperly issued ADRs.”

Earlier this month, BNY Mellon BK agreed to pay $54 million to resolve similar allegations, while in November, Citigroup C agreed to pay $38.7 million and Deutsche Bank DB nearly $75 million in July.

Shares of JPMorgan has lost 8.5% over the past six months compared with the industry’s decline of 19.1%.



Currently, JPMorgan carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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