The US Securities and Exchange Commission has announced that SG Americas Securities will pay more than $800,000 to settle charges of improper handling of 'pre-released' American Depositary Receipts (ADRs), predominantly by its predecessor entity.

In its order against SG Americas, a registered broker-dealer and a subsidiary of the French private bank Société Générale, the SEC says that the misconduct of a predecessor entity, Newedge USA, allowed pre-released ADRs to be issued that were not backed by the appropriate number of ordinary shares.  

This is the fifth action against a depository bank/broker for abusive pre-release practices resulting from the SEC’s long-standing investigation of abuses involving pre-released ADRs. It is concerned that such practices might inflate the total number of a foreign issuer’s tradeable securities, diluting existing shareholders’ equity.

Some of the pre-released ADRs were used for short-selling that may not otherwise have occurred, which could suppress the price of the issuer’s securities.