JP Morgan has revealed it is among a number of banks and broker-dealers being investigated by the US financial watchdog over potential abuses within its American Depositary Receipts (ADR) business.
JP Morgan stated in a quarterly filing the Securities and Exchange Commission (SEC) is investing the bank in conjunction with activities relating to pre-released ADRs, focusing on the period of 2011 to 2015.
“The firm has been cooperating with this investigation,” JP Morgan said in the filing.
The investigation follows the recent $75 million settlement Deutsche Bank agreed to pay to the SEC for improper handling of pre-released ADRs.
In the case against Deutsche Bank, the SEC alleged Deutsche’s US depositary bank has issued pre-released ADRs over a five-year period in cases where neither its broker not its customer actually owned the corresponding foreign shares.
ADRs, which allow US investors to trade in foreign stocks, require a matching number of foreign shares to be held at a custody or depositary bank, but can be “pre-released” if a broker or customer owns the underlying stock.