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SEC charges SG Americas Securities with mishandling ADRs
Chris Hamblin
26 September 2018
In its order against SG Americas, a registered broker-dealer and a subsidiary of the French private bank Société Générale, the SEC says that the misconduct of a predecessor entity, Newedge USA, allowed pre-released ADRs to be issued that were not backed by the appropriate number of ordinary shares. This is the fifth action against a depository bank/broker for abusive pre-release practices resulting from the SEC’s long-standing investigation of abuses involving pre-released ADRs. It is concerned that such practices might inflate the total number of a foreign issuer’s tradeable securities, diluting existing shareholders’ equity. Some of the pre-released ADRs were used for short-selling that may not otherwise have occurred, which could suppress the price of the issuer’s securities.