ADR Custody Fee Rules

This article provides a detailed introduction to American Depositary Receipts (ADRs) and the custody fees associated with them.

1. Introduction to ADRs

An ADR is a negotiable certificate issued by a US commercial bank that allows foreign securities to be traded in the US. You can trade an ADR on the US stock market. Each ADR represents a certain number of shares of a non-US company. These shares are held by a US bank, which then issues the ADRs representing the shares. The conversion ratio between the company's shares and the ADR is not always 1:1. For example, five shares of the company might be represented by a single ADR.

2. How custody fees are charged

The Depository Trust Company (DTC) began charging custody fees to brokers or clearing firms in 2008. These brokers or clearing firms then pass the fee on to investors holding ADRs. This is known as the ADR custody fee.

3. ADR custody fee

The custody fee for ADRs averages between 1 to 5 cents per share. The exact amount charged and the timing of the charge can vary for different ADRs. For specific information, please refer to the prospectus of each ADR or query online using the EDGAR company search tool.

4. Identifying ADR stocks

Generally, non-US companies with shares trading on US secondary markets may be subject to ADR custody fees. You can click here to confirm whether a particular stock is an ADR, as shown below:

5. ADR fee deduction

Go to the Longbridge App > Portfolio > More > Fund Details to check ADR custody fee records.

Key takeaways:

• Nature of ADRs: ADRs are negotiable certificates representing shares of a non-US company, issued and custodied by a US bank (the ratio of company shares to ADRs is not fixed at 1:1, for example, one ADR may represent five shares).
• Source of fees: The DTC charges brokers ADR custody fees, which are then passed on to investors holding ADRs.
• Fee standard: The custody fee typically ranges from 1–5 cents per share, though the exact amount and deduction time may differ among ADRs.
• Check method:
  • Confirm whether a stock is an ADR via the search tool provided by Longbridge.
  • Path for checking fee records in the Longbridge App: Longbridge App > Portfolio > More > Fund Details.

Disclosures

This article is for reference only and does not constitute any investment advice.