American Depository Receipts(ADR)
ADR is a dollar denominated negotiable
certificate representing a non-US company in US market which allows the US
citizens to invest in overseas securities.
1.
First of all, a company hands over the
shares to a Domestic Custodian Bank (DCB)
2.
Then DCB requests the American
Depository Bank (ADB) to issue the shares in the form of ADRs
3.
ADB converts the issue which are in
rupees into US dollars
4.
Finally, ADB issues them to the
intending investors.
The features of ADR are briefly given
hereunder
1. ADRs are denominated only in US dollars.
2.
They are issued only to investors who
are American residents.
3.
The depository bank should be located in
US.
4.
The approval of Securities and Exchange
Commission (SEC) of US needs to be obtained for issuing ADR.
5.
They are sub-classified on the basis of
level of clearance made by SEC.
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