ADS - Definition

Acronym for American Depositary Share, the common stock of foreign companies held in a custodial account by a US bank on behalf of the share holder. These shares are issued under American depository receipt agreement and ADR are issued against ADS. Depending on the level of compliance with US security regulations foreign companies may list the shares over-the-counter or on major stock exchanges like Nasdaq or NYSE. While over-the-counter listing has low reporting requirements, listing in major stock exchanges demand same level of reporting as domestic companies. Adherence to GAAP-998'>GAAP Accounting standards is mandatory. The share issued under an American Depositary Receipt agreement which is actually traded. Common stock (ordinary shares) of a foreign corporation, held by a US bank in a custodial account on behalf of a stockholder. American Depository Receipts (ADRs) are issued against ADS. A U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American Stock Exchange. American Depositary Shares (ADSs) are issued by depository banks in the U.S. under agreement with the issuing foreign company; the entire issuance is called an American Depositary Receipt (ADR) and the individual shares are referred to as ADSs. Depending on the level of compliance with U.S. securities regulations the foreign company wishes to follow, the company may either list its shares over-the-counter (OTC) with low reporting requirements or on a major exchange like the NYSE or Nasdaq. Listings on the latter exchanges generally require the same level of reporting as domestic companies, and also require adherence to GAAP accounting rules. Foreign companies opting ADS route enlist wider investor base that helps lower cost of future Capital. The US investors get the opportunity to invest in foreign companies without the hassle of foreign currency conversions and other cross border Investment regulations. As ADS is an investment in a foreign company the investments carry the Risk of foreign exchange Rate fluctuations.

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