In October 2008, the SEC changed a rule encouraging the establishment of more ADR programs. As a result of changes to the Rule 12g3-2(b), the number of Level 1 Sponsored and Unsponsored ADRs have soared. For example, before the rule become effective, there were 169 Unsponsored ADR(UADR) programs. After the rule change the number of UADRs have exploded with about 1,232 currently trading on the markets according to a research study by Deutsche Bank.
As a result of the SEC rule change many companies converted their UADRs to Level 1 programs. In the past 4 years, 41 companies have converted their UADRs to Level 1 programs. This change has triggered more investors’s interest in the ADRs as shown in the chart below:
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Source: Unsponsored ADRs: Evolution and opportunities, Deutsche Bank
The study noted that nearly three-fourths of the above programs saw a rise in turnover after the conversion.