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BNY Mellon to pay more than $54M for alleged improper handling of ADRs


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BNY Mellon to pay more than $54M for alleged improper handling of ADRs

Bank of New York Mellon Corp. agreed to settle charges of improper handling of pre-released American depositary receipts for $54 million.

The bank provided American depositary receipts, or ADRs, to brokers across thousands of pre-release transactions when neither the broker nor its customers had the foreign shares needed to support those new ADRs, according to the Securities and Exchange Commission. This inflated the total number of a foreign issuer's tradable securities, leading to inappropriate short selling and dividend arbitrage, the SEC added.

While BNY Mellon did not admit or deny the findings, it agreed to disgorge more than $29.3 million in alleged ill-gotten gains and pay $4.2 million in prejudgment interest and a $20.5 million penalty.

Earlier in 2018, Deutsche Bank and Citibank NA agreed to pay about $75 million and $38.7 million, respectively, to settle similar charges.

"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," said Sanjay Wadhwa, senior associate director of the SEC's New York regional office.