S&C Co-Chair Bob Giuffra spoke with Bloomberg Law about recent court rulings on how U.S. law applies to American Depositary Receipts (ADRs). “In evaluating sponsored ADRs, courts have held that there can be U.S. securities law liability,” Bob explains, noting that “[a]s to unsponsored ADRs, the law is less developed,” referring to when U.S. banks issue the ADRs without the issuer’s involvement.
Bob also observes that “[n]on-U.S. companies have a concern about being caught up or enmeshed in the U.S. litigation system,” which can be costly and unfamiliar to foreign issuers. “From a policy standpoint, it makes good sense that if a European issuer of securities is not involved in setting up the ADR program, and it’s just being done by a depository bank, the issuer shouldn’t have liability in the United States for securities law violations because the company didn’t opt into the U.S. system.”
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