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Watch out for American Depositary Receipt Fees

Kimberly Lankford

Some brokerages charge you extra when you invest in shares of foreign companies.



On my monthly statement from TD Ameritrade, I noticed a $6 "ADR service fee" on 300 shares of Tata Motors. When I called TD Ameritrade, the representative told me that charge was showing up on some foreign stocks but couldn't give a reason for it. In the future, will I pay a fee on any ADRs I own?

You won't have to pay a fee for all American depositary receipts, but there's nothing you can do about the one TD Ameritrade is charging you.

ADRs, which represent shares of ownership in a foreign company, trade in the U.S. in dollars. Some ADRs come with a contractual provision that allows the broker, in this case TD Ameritrade, to levy "depositary services fees."

The charges, commonly 2 cents per share, are intended to cover the cost of coordinating overseas investments. For ADRs that include this provision, the broker can levy the charge at any time, but no more than once a year.

Your broker should be able to give you a list of ADRs with these fees. They're most likely to be tacked on to companies based in developing countries, where it's more expensive to operate.

Got a question? Ask Kim at askkim@kiplinger.com.



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