Free US Law Dictionary

BETA

American Depositary Receipt

Finance
Financial markets
Financial market participants
Corporate finance
Personal finance
Public finance
Banks and Banking
Financial regulation

Types of Bank
Central bank
Advising bank
Commercial bank
Community development bank
Custodian bank
Depository bank
Investment bank
Islamic banking
Merchant bank
Mutual bank
Mutual savings bank
National bank
Offshore bank
Private bank
Savings bank
Swiss bank

Banking terms
Anonymous banking
Automatic teller machine
Deposit
Deposit creation multiplier
Loan

List of banks
List of banks in Canada
List of banks in Hong Kong
List of banks in Singapore

An American Depositary Receipt (or ADR) represents the ownership in the shares of a foreign company trading on US financial markets. The stock of many non-US companies trades on US exchanges through the use of ADRs. ADRs enable US investors to buy shares in foreign companies without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

Each ADR is issued by a US depository bank and can represent a fraction of a share, a single share, or multiple shares of foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR is often close to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares. In the case of companies incorporated in the United Kingdom, creation of ADRs attracts a 1.5% stamp duty reserve tax (SDRT) charge by the UK government.

Depository banks have numerous responsibilities to an ADR holder and to the non-US company the ADR represents. The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co. The largest depositary bank is the Bank of New York Mellon.

Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS).

Lawyers and Law Students! Can you improve this definition? Send us your improvements and we'll provide a link back to your website or blog.