US: NY Broker pleads guilty to bid rigging, again

Industrial and Commercial Bank of China Financial Services (ICBCFS)  pleaded guilty to an antitrust charge and was sentenced to pay a criminal fine in excess of US$3 million for its involvement in a bid-rigging conspiracy involving certain financial instruments, the Department of Justice announced Friday, June 14.

ICBCFS admitted, as part of a guilty plea, that from May 2012 until at least August 2014, it conspired with other institutions and individuals to submit rigged bids to borrow pre-release American Depository Receipts.  ICBCFS’s plea is the second in the ongoing criminal antitrust investigation; Banca IMI Securities previously pleaded guilty for its role in the conspiracy and was sentenced to pay a fine in excess of US$2 million on May 10, 2019.

Worldwide, thousands of publicly traded companies list their shares of common stock only on foreign stock exchanges.  Most US investors are unable to purchase or sell such foreign shares. The US Securities and Exchange Commission, however, permits four US depository banks to create ADRs, which represent foreign ordinary shares and can be traded in the United States.  Through the purchase and sale of ADRs, US investors are able to gain exposure to companies whose common stock is listed on foreign stock exchanges.

ICBCFS pleaded guilty to conspiring to borrow pre-release ADRs from US depository banks at artificially suppressed rates.  During the conspiracy, a US depository bank began using an auction-style process and invited ICBCFS and other broker-dealers to submit competitive bids for rates to borrow ADRs.