If you are an ADR investor, you may already know that banks that custody ADRs (ADR agents) are allowed to charge custody fees. The amount and timing of custody fees are detailed in your ADR prospectus.

In the past, ADR agents could collect custody fees only when they were able to subtract them from ADR dividends. Since many ADRs do not pay regular dividends, agents were often unable to collect their fees.

New fee-collection method approved by SEC

Last year, the Depository Trust Company (DTC) received SEC approval to start collecting custody fees on behalf of ADR agents for ADRs that do not pay periodic dividends. To collect the fees owed by ADR investors, the DTC has started charging companies like Schwab that hold ADRs for their clients. Fees charged to Schwab by the DTC are referred to as “ADR pass-through fees.”

What this means for ADR investors

• Fees collected from Schwab by the DTC will be automatically passed through to you. They will be deducted from your Schwab account and shown on your monthly statements. See sample statement.
• Pass-through fees are deducted from your account for your ADRs that do not pay dividends. For dividend-paying ADRs, agents will deduct their fees from your dividends as they have in the past. Going forward, both types of ADR fees will be identified on your statement as “ADR Pass Thru Fee.”
• ADR fees normally average from one to three cents per share. Fee amounts and timing differ by ADR. See your ADR prospectus for specific information. Search for it online with EDGAR Company Search.

Read answers to frequently asked questions.

Thank you for investing with Schwab.
We appreciate the opportunity to help you invest in foreign stocks with ADRs. Please call us if you have questions or need assistance at 800-435-4000.

How fees will appear on your statement

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Frequently asked questions about ADRs

What is an ADR? An ADR (American Depositary Receipt) is a receipt for shares of foreign-based companies that entitles the receipt holder to all dividends and capital gains. ADRs allow Americans to buy shares of foreign-based corporations’ securities on American exchanges instead of having to go to overseas exchanges.

Why do ADR agents charge fees? ADR agents (banks and investment banks) purchase stocks on foreign exchanges and then sell receipts for these shares on American exchanges. Fees compensate the agents for inventorying the foreign stocks and managing all registration, compliance and recordkeeping services.

Can I avoid the fees? Many banking agents who issue ADRs charge fees, and Schwab, like most brokerage firms, passes these fees through to clients. Should the fee change affect your decision to hold ADRs, you can explore other global investing opportunities or talk with us about other alternatives at 800-435-4000.

How can I get a prospectus for my ADR? If you have misplaced your ADR prospectus, you may be able to access one online by using the U.S. Securities and Exchange Commission’s EDGAR Company Search tool.

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