Level 1 ADR

[Ali_2]

Re: Level 1 ADR

@pakistanimard

So, i did wikipedia it. That there is some sort of arrangement between the broker/ Deposit bank in USA and the foreign market which facilitate the transaction. However i have some questions,

1. . Who initiates a share purchase? the US open market particpant asks the broker to get the foriegn shares and then the broker buys those shares and gives ADRs to local US buyer?

or

The broker already has the shares, and just transfers in the name of the local buyer?

2. what does ‘depository’ actually mean here..

3. how are dividends taxed?

for question 1. I believe the company initiate the ADRs to access US market because in Level 2 & level 3 ADRs the company has to follow US securities law and has to submit some forms in case of Level 2 & Level 3 ADRs and not in case of Level 1.

for Level 2 & level 3 Company has to prepare it’s accounts in accordance with US GAAP if it is not already preparing under US GAAP.

2. Depositary in this case means any investment bank or broker through whom company issues ADR by depositing its shares with them.