Table of Contents
Chapter 1: What are ADR (American Depository Receipts)
Chapter 2: How Do ADR Work
Chapter 3: Types of ADR
Chapter 4: Investing in ADR
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Chapter 3: Types of ADR
– OTC ADR
– Listed ADR
– Public Issues
- Chapter 3: Types of ADR
- OTC ADR (Level 1): These are not listed on any US exchange and can be traded only in the over-the-counter (OTC) market. These ADRs are not subject to very stringent regulations from the SEC. They represent shares of foreign companies that do not qualify for a US exchange listing or choose not to list on the exchange.
Investors can buy unsponsored OTC ADRs, which can be issued by more than one bank. Sponsored OTC ADRs are generally confined to being issued by one sponsoring bank. They are also more structured than unsponsored ones.
- Listed ADR (Level 2): These are typically listed on the NASDAQ or the NYSE and are subject to stricter SEC regulations which all listed companies need to comply with.
- Public Issues (Level 3): Some ADRs may be offered through a public issue by the sponsoring bank. The foreign company can raise substantial funds from the American markets with these ADRs. Publicly issued ADRs require the most stringent adherence to SEC rules.
ADRs come in different types depending on how and where they can be traded.
Next Chapter: Investing in ADR
