American Depositary Receipts are certificates representing ownership of foreign company shares and are traded on American stock exchanges. ADRs are issued by US banks who buy actual shares in overseas companies. ADRs give a chance to invest and also receive dividends in USD in companies outside of the US.
The custodian banks that create and manage ADRs charge a small, periodic servicing fee – typically $0.01 to $0.05 per share annually. These fees can be charged in two different ways:
- Through dividend payments: the fee is deducted from the dividend you receive
- Through direct charge: the fee will be deducted from your Lightyear cash balance when the custodian applies it, typically once per year. If the fee is charged through direct charge, you will see it as an entry in your Transaction tab
You are only charged the fee if you hold an ADR position on the record date. In case of a direct charge, the charge date is typically at the beginning of a month for all record dates on the previous month.
It's important to note that the fee is charged per share, not based on position value, so a large quantity of low price shares can create a significant amount of fees relative to your investment size. Example:
- Rate announced → $0.03 per ADR
- Record date March 13th → You hold 9 600 shares
- Charge date April 5th → 9 600 × $0.03 = $288 fee
ADR fees vary by asset. You can check with the specific depositary bank to confirm the reporting dates and exact fee per ADR. Please keep in mind that ADRs might also have small extra charges of $0.02–$0.05 per share during some corporate actions (e.g. ADR cancellation).
Please note that Lightyear cannot give tax advice about ADRs as it depends on individual circumstances and we recommend seeking a licensed professional where needed.
See also Dividend taxes