JPMorgan Chase Bank
October 17, 2003
Mr. Jonathan G. Katz
Re: Proposed Rule: Additional Form F-6 Eligibility Requirement
Dear Mr. Katz:
JPMorgan Chase Bank is pleased to have the opportunity to comment on the proposed amendments to the Form F-6 eligibility requirements in response to the Commission's request for comment as set forth in Release No. 33-8287, dated September 11, 2003.
The proposed rule would prohibit the use of Form F-6 to register unsponsored American Depositary Shares (ADSs) representing those shares of a foreign private issuer which are then currently listed on a national securities exchange or quoted on an automated quotation system of a national securities association.
Through its ADR Group, JPMorgan Chase Bank serves as depositary bank for a large number of sponsored and unsponsored American Depositary Receipt programs. We also serve as the transfer agent for a number of New York Share issues (i.e., shares of Dutch issuers maintained on a New York registry).
In our capacity as a depositary bank, we participate on a regular basis in the filing of registration statements on Form F-6 for both sponsored and unsponsored ADR programs. Our extensive experience in the ADR industry has given us an understanding of the objectives and concerns of foreign issuers and market participants in establishing ADR programs and investing in and trading ADRs.
We concur in the Commission's view that allowing global shares and New York shares to become the subject of unsponsored ADR programs could result in an undesired division of the market for a foreign issuers securities and give rise to investor confusion. Accordingly, JPMorgan wholly supports the proposed amendment to Form F-6.
In the current regulatory environment, we have observed a high level of concern among foreign issuers regarding U.S. laws, rules and regulations. This is due in large part to the additional corporate governance and disclosure obligations arising under the Sarbanes-Oxley Act of 2002.
As a result, foreign issuers have become increasingly circumspect about seeking a U.S. listing, and some have decided not to list based on such considerations. Under these circumstances, we believe it is critically important to be responsive to foreign issuer concerns where it is possible to do so without sacrificing investor protection.
As the Commission points out in its proposing release, foreign issuers should be able to control the form in which their securities are traded when choosing to enter the U.S. market. JPMorgan agrees that where a foreign issuer has taken the affirmative step to access our markets through the establishment of a sponsored ADR, New York share, global share or direct listing, permitting an unsponsored ADR to be established could frustrate the issuers intent. However we strongly believe that unsponsored ADRs can be very beneficial to investors and market participants under circumstances where a sponsored ADR facility, New York share, global share or direct listing does not exist.
We also believe that the potential for confusion can be detrimental to investors. Although institutions and other sophisticated investors are in many cases aware of the differences among unsponsored ADRs, sponsored ADRs, global shares, New York shares and direct listings, many less sophisticated investors are not as well informed. Given a choice between unsponsored ADRs and an alternate form of ownership chosen by the issuer, not all investors may understand the limitations they must accept if they purchase unsponsored ADRs. While these limitations may be described in the securities themselves, investors will not necessarily know (and the securities themselves are not required to explain) that sponsored ADRs, New York shares, global shares and directly listed shares confer greater rights on the holders thereof than do unsponsored ADRs. Thus concurrent trading of unsponsored ADRs and such other forms of ownership creates a risk that investors will not be able to make a fully informed decision in choosing between the two alternatives.
Accordingly, in order to promote the legitimate interests of both foreign private issuers and U.S. investors, we urge the Commission to implement the proposed rules in their current form. We also believe the same considerations apply to concurrent trading of sponsored and unsponsored ADRs, and we therefore encourage the Commission to consider further rulemaking prohibiting the use of Form F-6 to register unsponsored ADRs if a sponsored facility has been established.
Thank you for considering our comments. We would be pleased to answer any questions you may have or provide additional information.