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Answer Posted / neha sharma
ADR is a dollar-denominated negotiable certificate. It represents a non-US
company’s publicly traded equity. It was devised in late 1920s to help Americans
Invest in overseas securities and assist non-US company’s wishing to have
their stock traded in American markets. ADRs are divided into three levels based
on the regulation and privilege of each company’s issue.
1. ADR Level I: It is often the first step for an issuer into the US public equity
market. Issuer can enlarge the market for existing shares and thus,
diversify the investor base. The compliance of disclosure as per the
requirement of the Securities and Exchange Commission will be minimum
to the company.
2. ADR Level II: Through this level of ADR, the company can enlarge the
investor base for existing shares to a greater extent. The significant
disclosures have to be made by the company as per the requirement of
the Securities and Exchange Commission.
3. ADR Level III: This level of ADR is used for raising fresh capital through
public offering in the US capital market. The company has to register with
the Securities and Exchange Commission.
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