What does ADR mean in UNCLASSIFIED

What Are ADRs?

ADRs are U.S. dollar-denominated securities that represent underlying shares of a foreign company that are held in trust by a U.S.-based financial institution known as a depositary bank. The ADR allows investors to purchase the security without having to convert their funds into the foreign currency. ADRs also provide investors with an alternative way of gaining exposure to foreign markets without going through the hassle of dealing with multiple currencies or complex legal systems.

The sponsor of an ADR is typically a large domestic bank or broker-dealer in the U.S., such as JPMorgan Chase, Citigroup, Merrill Lynch or Morgan Stanley. The sponsor is responsible for helping companies from around the world list their stocks on U.S exchanges or over-the-counter (OTC) markets so they can be traded by American investors and other interested parties from all over the globe. The sponsoring institution makes sure that all rules and regulations are being followed by both parties, including accurate reporting of financial statements, public disclosure requirements and abiding by corporate governance standards established within the U.S.

Benefits Of Using ADRs

There are numerous benefits associated with using American Depositary Receipts when trading in foreign stocks such as lower transaction costs due to reduced exchange rate risks and greater liquidity due to increased trading activity in U.S.-based exchanges or OTC markets relative to those listed abroad providing more opportunities for investors to buy or sell their holdings quickly if needed - even in times of market crisis when prices may fluctuate severely day-to-day which can significantly decrease portfolio values if not well managed in advance. Additionally, since many major international companies already trade on exchanges within countries like Canada, Japan and Germany - listing these same stocks as ADRs provides additional access for U.S.-based investors who previously had limited options when looking for investments overseas outside of traditional mutual funds or ETFs (Exchange Traded Funds).