Brokers ADR Fees
Transfer agents and banks that manage American Depositary Receipts (ADRs) are allowed to charge holders a yearly custody ADR fee that ranges from $0.005 to $0.05 per share.
This fee is handled through the Depository Trust Company (DTC), which usually takes it out of your gross dividend payment. If the ADR does not pay a dividend, the fee is collected from your broker's clearing firm by the DTC and deducted from your account. The fee will appear on your monthly account statement and transaction history as "ADR Custody Fee" or "ADR Pass-Thru Fee."
Brokers ADR Commissions
ADR commissions are different from ADR fees. As you can see from the table below, most brokers do not charge ADR commissions:
How can I trade ADRs?
ADRs trade like U.S. stocks and are priced in U.S. dollars. You can place ADR orders online for both regular brokerage and retirement accounts (like IRA, SEP-IRA, Keogh, etc.). Some ADRs can be bought on margin.
How are ADR dividends paid?
Dividends are paid in U.S. dollars, but they may still be subject to foreign tax withholding.
What are the tax implications of ADRs?
You might be able to avoid certain taxes that come with trading directly in overseas markets. Ask a tax advisor for more details.
What Are The Reasons to Invest in ADRs?
Currency Exposure
Many investors wonder if there is still foreign currency risk with ADRs, since they are priced in U.S. dollars. The answer is yes, you still have currency exposure as if you invested in the company’s stock in its local market. For example, if you buy Nokia’s ADR (NYSE:NOK), you pay in dollars. The sponsoring bank converts your dollars to euros and buys shares in Nokia on the Finnish stock exchange. So the value of your ADR will go up and down with the euro.
FX Conversion Costs
Currency exposure also means thinking about conversion costs. In the example above, investors may overlook currency risk because the sponsoring bank handles converting U.S. dollars to euros. This makes things easier for the ADR investor. If you bought Nokia stock directly in Finland, you would need to convert your dollars to euros when you buy, and back to dollars when you sell.
Dividends
If you own Nokia stock directly, every time it pays a dividend, you would have to convert the euro dividend to dollars. If you own the ADR, the sponsoring bank does this for you—converting all dividend proceeds to U.S. dollars and sending them to ADR holders.
Filing Taxes
Owning foreign stocks directly and earning income abroad would usually mean you have to file annual tax forms in that country as well as your own. The more countries you invest in, the more paperwork there is. With ADRs, the sponsoring bank handles this, and your gains on the ADR are taxed like any U.S. stock.
Regulatory Concerns
Some investors avoid foreign stocks because different countries have different rules and regulations, and these can be confusing. U.S. public companies must submit audited financial statements every year. Most ADRs must also follow these requirements: there are 3 levels of ADRs, each with different rules. Level II and III ADRs must file annual reports with the SEC in English through the sponsoring bank. Level I ADRs do not, so investors should be more careful and do their own research.
Are ADRs Right for My Portfolio?
If you want to get specific exposure to foreign companies that you can’t get through mutual funds or ETFs, consider ADRs. Investing in ADRs instead of local shares usually gives the same results, but ADRs are much simpler to use. The sponsoring banks handle the currency conversion and dividend payments, and make sure the company follows the right rules and provides information in English. This lets you spend more time researching investments and less time worrying about paperwork.
Updated on 7/29/2025.