“An entity like Merrill may not avoid liability by using another broker to obtain fraudulently issued ADRs on its behalf,” the SEC says.
Source: www.cfo.com
Merrill Lynch has been fined over $8.0 million by the U.S. Securities and Exchange Commission for improper handling of “pre-released” American Depositary Receipts (ADR). The Company has failed to prevent and detect securities laws violations concerning borrowing “pre-released” ADRs from other brokers. Such practices may inflate the total number of a foreign issuer’s tradable securities, and thus occurrence of inappropriate short selling and dividend arbitrage. To settle allegations, Merrill Lynch has agreed to pay around ~$4.4 million in disgorgement of ill-gotten gains, over $724,000 in prejudgment interest and a $2.89 million penalty.
