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What Is Written Here Is Not Investment Advice. It has been published on this page to explain the terminology used with explanations about the stock market, digital currencies, economy, finance and investment instruments.

🔍What is ADR Fee?

  If you are an investor who owns shares of a foreign company, you may have noticed a small charge on your account statement called an ADR fee. What is this fee and why do you have to pay it? In this blog post, we will explain what an ADR fee is, how it is calculated, and how you can avoid or reduce it.

An ADR fee is a fee charged by a depositary bank that holds American Depositary Receipts (ADRs) for foreign companies. ADRs are securities that represent ownership of shares in a foreign company and trade on U.S. stock exchanges. They allow U.S. investors to easily invest in foreign companies without having to deal with currency conversion, foreign taxes, or different accounting standards.

A depositary bank is a financial institution that issues and manages ADRs for foreign companies. The depositary bank performs various services for the ADR holders, such as collecting dividends, converting currencies, and facilitating corporate actions. For these services, the depositary bank charges an ADR fee to the ADR holders.

The ADR fee is usually expressed as a percentage of the ADR price or as a fixed amount per ADR. The fee varies depending on the depositary bank and the foreign company. The fee is typically deducted from the dividends paid by the foreign company or from the proceeds of selling the ADRs. The fee is usually disclosed in the ADR prospectus or on the depositary bank's website.

The ADR fee is not a tax and does not affect the tax treatment of the ADRs. The fee is considered an expense for the ADR holder and reduces the net return on the investment. The fee may also affect the cost basis of the ADRs for capital gains purposes.

There are some ways to avoid or reduce the ADR fee. One way is to invest directly in the foreign company's shares on its home market instead of buying the ADRs. However, this may involve higher transaction costs, currency risks, and regulatory hurdles. Another way is to choose ADRs that have lower fees or no fees at all. Some depositary banks waive or reduce the fees for certain ADRs as a marketing strategy or as a benefit for loyal customers. You can check the fee schedule of different ADRs on the depositary bank's website or contact your broker for more information.


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