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ADR broker-dealer to pay $3.9M
The Securities and Exchange Commission has announced that broker-dealer Jefferies LLC will pay nearly $4 million to settle charges of improper handling of "pre-released" American Depositary Receipts, which are U.S. securities that represent foreign shares of a foreign company, and require a corresponding number of foreign shares to be held in custody at a depositary bank. The SEC’s order finds that Jefferies improperly borrowed pre-released ADRs from other brokers when Jefferies should have known that those brokers did not own the foreign shares needed to support those ADRs. The order also asserts that Jefferies failed to reasonably supervise its securities lending desk personnel concerning borrowing pre-released ADRs from these brokers.
Without admitting or denying the SEC’s findings, Jefferies agreed to disgorge more than $2.2 million in ill-gotten gains and pay over $468,000 in prejudgment interest and a $1.25 million penalty for total monetary relief of $3.918 million.