| Depositary Receipts are negotiable receipts, which evidence the deposit of foreign securities. DR is a vehicle for trading in traditional foreign securities. Although they are not stock certificates in and of themselves, the receipts are similar to the extent they are traded in much the same way as their security counterparts. Since the birth of ADRs in 1927, they have become the most widely used vehicle for trading in the U.S. DR is divided into ADR, EDR, HKDR, SDR and so on according to different issuing places. ADRs are divided into un-sponsored ADRs and sponsored ADRs while the sponsored ADRs are divided into the first class ADRs, the second class ADRs, the third class ADRs and ADRs under Rule 144A. There are different requirements for registration and disclosure on different ADRs. The holder of the DR is entitles to withdraw the deposited securities at any time. The operation of DR includes issuance, transfer and withdraw. The free conversion of DR and the deposited securities helps to smooth away the price balance.The issuance of DR involves the Issuing Company, Deposit Bank, Trustee Bank and investors. All the parties sign a series of contracts to finish the issuance of DR. In order to protect the real shareholder of the Company----holder of DR, the regulation organs will specify the disclosure duty of the Company and the liability when violating the duty. The injured party may ask for remedy based on Contract Law and Tort Law. Anyway the Privity of Contract cannot provide the remedy to all the investors while the Tort Law can. However the plaintiff has to assume the quoting duty during asking for remedy according to Tort Law. The law may enact the legal duty for those who violate disclosure duty to reduce the plaintiff's quoting duty.DR legal relation is one kind of Trust relation concerning foreign affairs. The uniform jurisdiction system has not come into being in the world. Roche Case set up the rule that the U.S. court has jurisdiction over the first class ADRs. The basis is minimum contact principle and investor protection rule. Ascertaining the jurisdiction over DR cases must obey the efficiency rule, international cooperation rule and investor protection rule. Disputes relating to contracts should defer to the agreement first while courts of the injuring place and the plaintiff' place should have jurisdiction over disputes relating to torts. One of the primary features of an ADR is that it is a U.S. security, subject to the familiar trading and settlement procedures for any domestic security. There are Federal laws, State laws, SEC rules and regulations of the exchange and the precedents. There are regulations on ADR's issuance, public offering, private placement and international offering. To protect the investors is the primary goal, which is realized by performing full disclosure system, of 1934 Securities Exchange Act. 1933 Securities Act grants the investor to sue against those who made fraud statement or material omission in the registration documents.To import CDR has its possibility and necessity. The laws and regulations of China forbid companies, which is incorporated in foreign country to enter into Chinese Capital market. What's more, the foreign exchange regulation policy in China still places a lot approvalprocedure for the foreign investment under capital account. The pricing policy, the conversion between CDR and deposit securities, the qualification of the Company are all the issues to be considered because of the foreign exchange policy. We can change the policy step by step and to realize the free change of foreign exchange.During the design of CDR, one agency---qualified dealer---may be designed to delete the price balance. The CDR to be designed at the moment is just a transitional one but not a real one. The most possible CDR to be designed is something like the Third class ADRs. We must perfect our regulation system, investor protection system and the resolution system of the civil disputes on securities to pr... |
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