India, March 23 -- The U.S. Securities and Exchange Commission announced that Merrill Lynch, Pierce, Fenner & Smith Inc. will pay over $8 million to settle charges of improper handling of "pre-released" American Depositary Receipts or ADRs.
The SEC's order found that Merrill Lynch improperly borrowed pre-released ADRs from other brokers when Merrill Lynch should have known that those brokers - middlemen who obtained pre-released ADRs from depositaries - did not own the foreign shares needed to support those ADRs. Such practices resulted in inflating the total number of a foreign issuer's tradeable securities, which resulted in abusive practices like inappropriate short selling and dividend arbitrage that should not have been occurring.
Th...