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My brokerage charges me a fee to hold ADRs; this fee is deducted anytime the ADRs pay dividends. I'm told that this is a standard fee and could not be negotiated.

Is this fee truly carved in stone, or do some brokerages charge different fees (or none at all) to hold ADRs?

EDIT

Just to clarify, this is not the foreign tax on dividends, but the custodian fee. I've found some more information at http://www.schwab.com/public/schwab/nn/m/q207/adr.html:

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.

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.

What I'm unclear about is whether this fee varies among brokerages, and to what extent it may be negotiable.

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  • This answer provides additional details about ADR fees and dividend payments money.stackexchange.com/questions/5397/…
    – Ellie K
    Commented Oct 8, 2011 at 18:21
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    You said you weren’t talking about foreign taxes and then accepted the answer that said the fee was foreign taxes and rejected the answer that says it is a fee the ADR custodian charges??
    – Scooter
    Commented Oct 12, 2021 at 2:39

2 Answers 2

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That's not a fee, it's the tax you pay the ADR's country of origin. This money does not go to your broker.

You can reclaim this when you file your taxes by filling out Form 1116, provided you've been holding the ADR in a taxable account. (This is to avoid double taxation, one by the ADR's country of origin and one by United States)

For tax-deferred accounts, you don't have a recourse.

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The custodian/depositary bank for the ADR may charge a custodian/depositary fee by subtracting from the dividends. These fees are spelled out in the Deposit Agreement of the ADR. You can obtain a copy of the Deposit Agreement on EDGAR. In addition, the fees may also be spelled out in the ADR's yearly filing of SEC Form 20-F (also available on EDGAR). For example, you can see the maximum fees for Sony Corporation ADR (NYSE: SNE) in its 2019 filing of Form 20-F (Item 12 (D) American Depositary Shares, pages 100-101).

In cases where the ADR does not pay dividends, or where the dividend amounts are not enough to cover the fee, the custodian bank would collect the fee via the Depository Trust Company (DTC). The DTC will collect the fee from your stock broker, who will subtract the amount from the cash balance of your brokerage account.

Some custodian banks publish the historical fees charged for particular ADRs. These historical fees may be available online. When dealing with a sponsored ADR, you can always contact the company's investor relations department for details about the ADR fees.

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