American Depository Receipts

In the course of my various foreign travels, I have had occasion to speak to many underwriters and brokers who place D&O insurance for non-U.S. companies whose American Depository Receipts (ADRs) trade in the U.S. There is a pervasive, inexplicable, and mistaken belief among some underwriters and brokers that companies whose Level I ADRs trade in the U.S cannot be subject to a U.S. securities suit. These individuals persist in this error despite the Toshiba case, in which the Ninth Circuit reversed a district court’s dismissal of the securities suit brought by investors in Toshiba’s unsponsored Level I ADRs. Because of the persistence of the error about the potential liability of companies with ADRs trading in the U.S., it is mandatory for every single underwriter or broker who places D&O insurance for a non-U.S. ADR company to read the latest court ruling in the Toshiba case. As discussed below, the U.S. securities lawsuit brought against Toshiba brought by purchasers of the company’s unsponsored Level I ADRs is going forward. 
Continue Reading U.S. Securities Suit of Toshiba’s Unsponsored ADR Investors to Proceed – Including Even Their Japanese Law Claims

tescoIt has been over five years since the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank restricted the ability of shareholders of non-U.S. companies who purchased their shares outside the U.S. to file securities fraud lawsuit in U.S. courts under the U.S. securities laws. During that five year period, the lower courts have sorted out many of the issues the Morrison decision raises. But one issue continues to percolate – that is, the question of Morrison’s effect on securities suits brought in U.S. court under U.S. law against non-U.S. companies by investors who purchased the companies’ unlisted ADRs over- the-counter in the U.S. The investor lawsuits filed in U.S. court just in the last few days by holders of unlisted Volkswagen ADRs raise this very issue.

The action filed in Southern District of New York in October 2014 by holders of unlisted ADRs of Tesco raise these same issues as well. The parties’ briefing in connection with the defendants’ motion to dismiss in the Tesco case present a detailed examination of the issues involved in the question of the applicability of Morrison to transactions in unlisted ADRs, as discussed below.
Continue Reading Tesco Securities Suit: Applicability of U.S. Securities Laws to Unlisted ADRs?