The Securities & Exchange Commission found that BNY Mellon improperly provided ADRs to brokers in thousands of pre-release transactions when neither the broker nor its customers had the foreign shares needed to support those new ADRs. The inflated the total number of a foreign issuer’s tradeable securities, resulting in abusive practices like inappropriate short selling and dividend arbitrage that should not have been occurring.
This is the seventh action against a bank or broker and third action against a depositary bank resulting from the SEC’s ongoing investigation into abusive ADR pre-release practices. “Our ongoing industry-wide investigation into Wall Street misconduct marches on,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. “BNY Mellon is the seventh bank or broker being held accountable for improper practices that allowed banks and brokerage firms to profit handsomely while market participants were unaware of how the market was being abused.”