American Depository Receipt/ American Depository Security Meaning & Definition

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Definition of American Depository Receipt/ American Depository Security

American Depository Receipt/ American Depository Security is a receipt representing the beneficial ownership of foreign securities being held in trust overseas by a foreign branch of a US bank. ADRs / ADSs facilitate the trading and ownership of foreign securities and trade in the US on an exchange or in the over the counter markets

Applying "American Depository Receipt/ American Depository Security" to Securities Exams:

ADRs allow US investors to easily buy securities that don’t trade in the US. Receipts are issued representing the foreign securities and those receipts are registered securities in the US. That means that all the rules that govern US trading of securities also govern the ADRs i.e.: the US rules of good delivery apply; payment is in US dollars; information regarding the company is provided to the customer in English; dividends, though declared in the foreign currency, are paid to the customer in US dollars.