Each ADR is associated with a level. Each level represents the different structures and reporting requirements associated with a specific ADR Program. There are three different ADR Levels.
Level I
The Level I ADR structure provides issuers with a simple and efficient means of building a core group of U.S. investors with minimal regulatory and reporting requirements. The ADRs are traded on the over-the-counter "Pink Sheet" market and on some exchanges outside the U.S. Generally, the establishment of a Level I program is considered a first step by issuers entering the U.S. public equity market.
Level II
Level II ADR structures are traded on an exchange (NYSE, NASDAQ, Amex) in reliance upon Securities Act registration (Form F-6) and Exchange Act reporting (Form 20-F/Form 6-K) requirements. At the time of listing, the issuer did not register a public offering. Level II programs require a greater degree of SEC reporting than a Level I. Issuers must reconcile their accounting to U.S. GAAP and meet the listing requirements of a particular U.S. exchange.
Level III
The Level III ADR structure is a simultaneous public offering and listing of equity securities on a U.S. exchange. The issuer registers the offering under the 1933 Securities Act (F-1/F-3) and subsequently registers and reports under the 1934 Exchange Act. Issuers must provide a full reconciliation of their accounting to U.S. GAAP, and meet exchange listing requirements. Unless an exemption is available, the Level III program requirements must be met where a non-U.S. issuer -- which does not previously have a listed ADR program in existence -- intends to publicly acquire a U.S. company using ADRs as the transaction currency.