A broker-dealer agreed to settle SEC charges for improper handling of "pre-released" American Depository Receipts ("ADRs").
According to the SEC, Wedbush Securities, Inc. ("Wedbush") improperly obtained pre-released ADRs from depository banks and loaned them to counterparties without "taking reasonable steps to determine whether the requisite number of ordinary shares was owned and custodied by Wedbush and its counterparties." The SEC alleged that such conduct resulted in the inflation of the total number of a foreign issuer's tradeable securities, which further led to inappropriate short-selling and dividend arbitrage.
Wedbush agreed to disgorge over $4.8 million, as well as more than $2.4 million in penalty, for total monetary relief of more than $8.1 million.
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