Mark Saunders


One of the more popular means utilized by foreign private issuers in recent years to create a market for their securities and to raise capital in the United States has been the issuance of American Depositary Receipts (“ADRs”). The estimated total dollar volume of ADR trading on U.S. exchanges in 1992 was approximately U.S.$125 billion. ADRs are negotiable certificates issued by a United States bank or trust company. These certificates represent an ownership interest in a foreign private issuer's securities deposited, usually outside the United States, with a financial institution as depositary.The underlying securities represented by ADRs may be either debt or, more commonly, equity instruments. This Article will address the benefits and uses of ADR financing and the legal and practical issues related to the establishment and operation of ADR facilities. Additionally, this Article will provide an analysis of pending Securities and Exchange Commission (“SEC”) initiatives with respect to international securities regulations, which are likely to impact the ADR market.