ITG Paying $24 Million for Improper Handling of ADRs
ITG agreed to pay over $24.4 million to settle SEC charges that it illegally facilitated pre-releases of ADRs without holding underlying foreign shares from 2011 to 2014, enabling market abuse through short selling and dividend arbitrage, violating Section 17(a)(3) and failing to supervise its securities lending desk.
ITG, a broker-dealer, settled SEC charges by paying more than $24.4 million, including $15 million in disgorgement, $1.8 million in interest, and a $7.5 million penalty, for violating Section 17(a)(3) of the Securities Act of 1933. The SEC found that ITG facilitated unauthorized pre-releases of American Depository Receipts (ADRs) between 2011 and 2014 without possessing or ensuring custody of the underlying foreign shares, enabling short selling and dividend arbitrage. ITG neither admitted nor denied the allegations but was censured, and the SEC acknowledged its cooperation and remedial actions during the investigation.
ITG, a broker-dealer, agreed to pay over $24.4 million to settle SEC charges related to its improper handling of American Depository Receipts (ADRs) from 2011 to 2014. The SEC found that ITG facilitated 'pre-releases' of ADRs to counterparties without owning or ensuring custody of the underlying foreign shares, violating Section 17(a)(3) of the Securities Act of 1933 and failing to reasonably supervise its securities lending desk. These improperly issued ADRs were frequently used for short selling and dividend arbitrage, creating significant risks of market abuse due to the lack of backing by actual foreign shares. Without admitting or denying the findings, ITG accepted a censure, paid $15 million in disgorgement, $1.8 million in prejudgment interest, and a $7.5 million civil penalty. The SEC acknowledged ITG’s cooperation during the investigation and its implementation of remedial measures as mitigating factors. The case was investigated by SEC staff in the New York Regional Office, including Andrew Dean, William Martin, Elzbieta Wraga, and Adam Grace, under the supervision of Sanjay Wadhwa. The SEC’s ongoing investigation into related matters continues, though this settlement resolves the specific charges against ITG.
Exhibits & Attached Documents (2)
Extracted insights
- $24.40M $24.4 million $10M–$100M
- $15.00M $15 million $10M–$100M
- $7.50M $7.5 million $1M–$10M
- $1.80M $1.8 million $1M–$10M
- person adam grace
- person andrew dean
- person Andrew M. Calamari
- agency director of the sec's new york regional office
- person Elzbieta Wraga
- person federal securities laws
- person Sanjay Wadhwa
- agency sec's continuing investigation
- person william martin
- ITG agreed to pay more than $24.4 million to settle charges
- ITG violated federal securities laws
- ITG prompted issuance of American Depository Receipts (ADRs) without possessing underlying foreign shares
- ITG obtained ADRs from depositary banks
- ITG facilitated pre-release transactions of ADRs to counterparties without owning foreign shares
- ITG violated Section 17(a)(3) of the Securities Act of 1933
- ITG failed to supervise employees on its securities lending desk
- ITG agreed to pay more than $15 million in disgorgement
- ITG agreed to pay more than $1.8 million in interest
- ITG agreed to pay more than $7.5 million in penalty
- ITG's improper handling of ADRs lasted from 2011 to 2014
- Andrew M. Calamari is Director of the SEC's New York Regional Office
- Andrew Dean conducting SEC's continuing investigation
- William Martin conducting SEC's continuing investigation
- Elzbieta Wraga conducting SEC's continuing investigation
- Adam Grace conducting SEC's continuing investigation
- Sanjay Wadhwa supervising the case
The Securities and Exchange Commission today announced that broker ITG agreed to pay more than $24.4 million to settle charges that it violated federal securities laws when it prompted the issuance of American Depository Receipts (ADRs) without possessing the underlying foreign shares. ADRs are U.S. securities that represent shares of a foreign company, and for all issued ADRs there must be a corresponding number of foreign shares in custody. On behalf of counterparties, ITG obtained ADRs from depositary banks that administer ADR programs. The SEC’s order finds that ITG facilitated transactions known as “pre-releases” of ADRs to its counterparties without owning the foreign shares or taking the necessary steps to ensure they were custodied by the counterparty on whose behalf they were being obtained. Many of the ADRs obtained by ITG through pre-release transactions were ultimately used to engage in short selling and dividend arbitrage even though they may not have been backed by foreign shares. ITG’s improper handling of ADRs lasted from 2011 to 2014. “ITG’s failure to properly supervise its securities lending desk caused ADRs to be issued that were not backed by actual shares, leaving them ripe for potential market abuse,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. The SEC’s order finds that ITG violated Section 17(a)(3) of the Securities Act of 1933 and failed reasonably to supervise its employees on its securities lending desk. Without admitting or denying the findings, ITG agreed to be censured and pay more than $15 million in disgorgement plus more than $1.8 million in interest and a penalty of more than $7.5 million. The SEC’s order acknowledges ITG’s cooperation in the investigation and its remedial acts. The SEC’s continuing investigation is being conducted by Andrew Dean, William Martin, Elzbieta Wraga, and Adam Grace of the New York office, and the case is being supervised by Sanjay Wadhwa.
The Securities and Exchange Commission today announced that broker ITG agreed to pay more than $24.4 million to settle charges that it violated federal securities laws when it prompted the issuance of American Depository Receipts (ADRs) without possessing the underlying foreign shares. ADRs are U.S. securities that represent shares of a foreign company, and for all issued ADRs there must be a corresponding number of foreign shares in custody. On behalf of counterparties, ITG obtained ADRs from depositary banks that administer ADR programs. The SEC’s order finds that ITG facilitated transactions known as “pre-releases” of ADRs to its counterparties without owning the foreign shares or taking the necessary steps to ensure they were custodied by the counterparty on whose behalf they were being obtained. Many of the ADRs obtained by ITG through pre-release transactions were ultimately used to engage in short selling and dividend arbitrage even though they may not have been backed by foreign shares. ITG’s improper handling of ADRs lasted from 2011 to 2014. “ITG’s failure to properly supervise its securities lending desk caused ADRs to be issued that were not backed by actual shares, leaving them ripe for potential market abuse,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. The SEC’s order finds that ITG violated Section 17(a)(3) of the Securities Act of 1933 and failed reasonably to supervise its employees on its securities lending desk. Without admitting or denying the findings, ITG agreed to be censured and pay more than $15 million in disgorgement plus more than $1.8 million in interest and a penalty of more than $7.5 million. The SEC’s order acknowledges ITG’s cooperation in the investigation and its remedial acts. The SEC’s continuing investigation is being conducted by Andrew Dean, William Martin, Elzbieta Wraga, and Adam Grace of the New York office, and the case is being supervised by Sanjay Wadhwa.