Unsponsored ADR

AAA

DEFINITION of 'Unsponsored ADR'

An American depositary receipt (ADR) issued by a depositary bank without the involvement or participation - or even the consent - of the foreign issuer whose stock underlies the ADR. The issuer therefore has no control over an unsponsored ADR, in contrast to a sponsored ADR where it retains control. Unsponsored ADRs are usually established by depositary banks in response to investor demand. Shareholder benefits and voting rights may not be extended to the holders of these particular securities. Unsponsored ADRs generally trade over-the-counter (OTC) rather than on United States exchanges.

BREAKING DOWN 'Unsponsored ADR'

The number of unsponsored ADR issues surged after Oct. 10, 2008, when the Securities and Exchange Commission (SEC) amended an exemption applicable to foreign issuers, which allowed them to have their securities traded in the U.S. OTC market without the registration required under Section 12(g) of the SEC Act of 1934.


The amendment eliminated the written application and paper submission requirements by providing automatic exemption from Section 12(g) to foreign issuers that met certain conditions. These conditions required the issuer to maintain a listing of its shares in its primary market outside the U.S., and publish electronically in English specified non-U.S. disclosure documents.


Since depositary banks were not required to notify the underlying issuers or obtain permission before registering unsponsored ADRs with the SEC, there was a rush to bring these to market, resulting in multiple unsponsored ADRs sometimes being created for the same issuer.

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Nasdaq

    A global electronic marketplace for buying and selling securities, ...
  3. Foreign Currency Effects

    The gain or loss on foreign investments due to changes in the ...
  4. Voting Right

    The right of a stockholder to vote on matters of corporate policy ...
  5. International Depository Receipt ...

    A negotiable certificate issued by a bank representing ownership ...
  6. New York Stock Exchange - NYSE

    A stock exchange based in New York City, which is considered ...
Related Articles
  1. Economics

    American Depositary Receipt Basics

    Thanks to American depositary receipts, investors now have a world of investing opportunities to choose from.
  2. Investing Basics

    Introduction To American Depositary Receipts (ADRs)

    Investors should look beyond the confines of the U.S. borders to diversify and maximize returns. ADRs are one way to diversify your portfolio and help you achieve better returns when the U.S. ...
  3. Bonds & Fixed Income

    An Introduction To Depositary Receipts

    Learn about a security that allows you to invest in a foreign company through your local exchange.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  6. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total World Stock

    Learn about the Vanguard Total World Stock exchange-traded fund, which invests in stocks located in numerous countries with a high level of diversification.
  9. Mutual Funds & ETFs

    ETF Analysis: WisdomTree International Hdgd Div Gr

    Review an analysis of the WisdomTree International Hedged Dividend Growth Fund ETF, which offers investors broad international exposure.
  10. Stock Analysis

    The 5 Biggest Canadian Oil Companies

    Obtain information about some of the largest and most successful major integrated oil corporations that are headquartered in Canada.
RELATED FAQS
  1. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  2. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  3. What are the differences between global depositary receipts (GDRs) and American depositary ...

    A global depositary receipt (GDR) is a bank certificate issued in multiple countries for shares in a foreign company. The ... Read Full Answer >>
  4. What is the difference between a greenfield investment and a regular investment?

    A greenfield investment is a particular type of investment where an international company begins a new operation in a foreign ... Read Full Answer >>
  5. What are the benefits for a company investing in a greenfield investment?

    Advantages of greenfield investments include increased control, the ability to form marketing partnerships and the avoidance ... Read Full Answer >>
  6. Why did China designated certain territories as special administrative regions?

    The primary reason for the People's Republic of China designating two territories as special administrative regions, or SARs, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!