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- A group of banks join with SWIFT to test real-time gpi cross-border payments in Europe through the Eurosystem’s TARGET Instant Payments Settlement (TIPS)
- HSBC is adopting Globality’s innovative AI-based platform for sourcing and procurement of services
- lastminute.com working with Mastercard and Divido on a new instalment payment solution when booking travel
- Banking Trojans increasingly problematic for businesses says cyber experts Beazley
- Currencycloud and start-up Evarvest in new partnership expired
- Habito CEO comments “Despite house prices slowing down, recent Habito research shows cost is the biggest concern for would-be buyers across the UK" expired
- Marqeta $260m funding announced expired
- Monese brings Apple Pay in further markets to its customers expired
- Monzo reaches two million customer level expired
- Paragon's Asset finance business continues to grow its loan book expired
16th November 2018
Citibank to pay more than $38m for improper handling of ADRs
The Securities and Exchange Commission (SEC) has announced that Citibank has agreed to pay $38.7m to settle charges of improper handling of “pre-released” American Depositary Receipts (ADRs).
ADRs – U.S. securities that represent foreign shares of a foreign company – require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADR represents.
The SEC found that Citibank improperly provided ADRs to brokers in thousands of pre-release transactions when neither the broker nor its customers had the foreign shares needed to support those new ADRs. Such practices resulted in inflating the total number of a foreign issuer’s tradeable securities, which resulted in abusive practices like inappropriate short selling and dividend arbitrage that should not have been occurring.
This is the second action against a depositary bank and sixth action against a bank or broker resulting from the SEC’s ongoing investigation into abusive ADR pre-release practices.
“Our charges against Citibank are the latest in our ongoing investigative effort to hold accountable Wall Street institutions that participated in an industry-wide fraud,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. “Our investigation into these practices has revealed that banks and brokerage firms profited while ADR holders were unaware of how the market was being abused.”
Without admitting or denying the SEC’s findings, Citibank agreed to pay more than $20.9m in disgorgement of ill-gotten gains plus $4.2m in prejudgment interest and a $13.5m penalty for a total of more than $38.7m. The SEC’s order acknowledges Citibank’s remedial acts and cooperation in the investigation.