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Ebb & Flow

The Bank of New York has seen a big increase in the number of ex-U.S. biotech companies seeking Level I ADRs in order to get access to U.S. investors. The move is most likely being driven by lack of interest in local companies by home-country investors.

"I think there's a desire for companies in Europe and other regions to reach out to U.S. investors by way of establishing a U.S. trading facility that's low cost, doesn't subject them to SEC regulations or to Sarbanes-Oxley," Richard Smith, vice president of depositary receipts, told Ebb & Flow. "EU specialist funds investing in these companies are drying up, and the companies want to be able to get investors in the U.S. capital markets."

Level I ADRs trade on the OTC Pink Sheets and are not subject to U.S. GAAP reporting, SEC regulations or Sarbanes- Oxley. The downside is that companies with Level I ADRs do not have the ability to raise capital on U.S. stock markets through a follow-on or IPO. However, they can raise money through private placements. The cost to set up Level I ADRs is about $20,000-$30,000 in legal fees and there are no maintenance costs, Smith said.

Companies with Level II ADRs trade on the major markets, such as the NASDAQ National Market or AMEX, and must comply

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