# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Unsponsored American Depository Receipt (ADR)

Written By
Paul Tracy
Updated September 30, 2020

What is an Unsponsored American Depository Receipt (ADR)?

An Unsponsored American Depository Receipt (ADR), though backed by the common stock of an offshore company, is not directly sanctioned by that company and renders the holder un-entitled to the shareholder benefits that come with a sponsored ADR.

How Does an Unsponsored American Depository Receipt (ADR) Work?

An ADR is a financial instrument denominated in U.S. Dollars that allows U.S. investors to invest in the common stock of offshore entities. In the case of sponsored ADRs, wherein the offshore entity engages in and accounts for an ADR's issuance, holders are entitled to certain voting rights as de facto holders of the underlying stock

Unsponsored ADRs, albeit legitimate, are often issued by proxy by some brokerage entity that holds an offshore company's common stock and does not involve the issuing offshore entity in the ADR's issuance. For this reason, holders of unsponsored ADRs are not entitled to the same rights as those that hold sponsored ADRs.

To illustrate, suppose Bob and Jack both hold ADRs for French company XYZ. Bob holds a sponsored ADR and is regarded as having the same voting rights and entitlements as a holder of XYZ's common stock. Jack, however, holds an unsponsored ADR produced individually by his broker. Though Jack is entitled to the value and dividend rewards offered by XYZ's underlying common stock, he is not entitled to the same rights as a common stock holder, because the ADR was produced by his broker without the direct involvement of XYZ.

Why Does an Unsponsored American Depository Receipt (ADR) Matter?

Unsponsored ADRs present a risk on the part of the investor since they are not sanctioned by the issuer of the underlying stock and as a result they are only as trustworthy as the issuing broker.  

Ask an Expert about Unsponsored American Depository Receipt (ADR)
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Unsponsored American Depository Receipt (ADR).
Be the first to ask a question

If you have a question about Unsponsored American Depository Receipt (ADR), then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Unsponsored American Depository Receipt (ADR), then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Unsponsored American Depository Receipt (ADR)

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms