Business, Legal & Accounting Glossary
Depositary Receipt (DR) was created in 1927 to aid US investor who wished to invest in non-US corporations.
A depositary receipt is a negotiable certificate of ownership of shares in a foreign company traded in the USA through a US depository bank. Each depositary receipt represents a specific multiple or fraction of the underlying shares in the custody of the US bank’s foreign branch or its correspondent. The depositary receipt is publicly traded in either the over-the-counter market (Level-One Depositary Receipt) or on a national stock exchange (American Depositary Receipt). A depositary receipt can also be privately placed to Qualified Institutional Buyers (Rule 144A ADR). A US holder of the depositary receipt gets all benefits of foreign diversification and earns dividends in US dollars without incurring foreign custodial charges. Also, public trading of a depositary receipt is subject to trading, settlement, and reporting rules like any other US security. The underlying stocks in a depositary receipt are subject to foreign tax withholding in their country of origin.
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This glossary post was last updated: 9th February, 2020 | 0 Views.