ADR Pass-Through Fees: Another Hand in Investors' Pockets

Includes: BK, JPM
by: David Merkel, CFA

One thing that is different about me as a blogger — I not only write about the economy, but I am actively trying to apply my views through investing.  So, sometimes readers will get the micro-level aspects of investing.  This evening I got the unwelcome surprise of additional fees on some of my ADRs — It seems that the SEC has allowed for the passthrough of custody fees to shareholders.

Now, I know that there are implicit fees on sponsored ADRs, and both of the ADRs that I got hit with fees on are sponsored.  My question is this: Did the banks sponsoring the ADRs give up their other fees in order to charge explicit fees to the shareholders?  I expect not.  I am considering writing to the companies whose shares I own, in order to get them to consider choosing another bank that will not charge fees to its ADR holders.

It is not just one bank — both BNY Mellon (NYSE:BK) and JP Morgan (NYSE:JPM) took fees from me.  Particularly galling were the fees on SABE SP (NYSE:SBS), where since the dividend was taken in two parts, they took two equal fees, even though one dividend was tiny and the other big.

I don’t begrudge legitimate fees, but I really dislike fees that surprise me.  Consider this as you invest in ADRs, and contact the Investor Relations areas of those companies to choose banks that will not charge ADR holders.

Disclosure: Long SBS