American Depository Receipts – ADRs


American Depository Receipts (ADR) trade on U.S. Stock Exchanges and allow investors to invest in foreign securities denominated in U.S. Dollars. American banks hold foreign securities in safekeeping in their foreign branches and issue a claim to them which can be traded on U.S. stock exchanges. In the past, investments in foreign securities were not as prevalent amongst U.S. investors as it is today. Globalization has helped change the perspective of investors as the total value of foreign securities now exceeds the total market value of the U.S. securities markets.

Investors can obtain exposure to foreign securities with many different investment vehicles. An American Depository Receipt represents one or more shares of foreign stock or a fraction of a share. If you own an American Depository Receipt you have the right to obtain the foreign stock it represents, however most U.S. investors find it convenient to own the ADR. The price of an American Depository Receipt corresponds to the price of the foreign stock in its home market, adjusted to the ratio of the ADRs to foreign company shares.

The main benefits to investing in foreign securities through American Depository Receipts are:

  • SEC Registration
  • U.S. Dollar Denominated Market Value
  • U.S. Dollar Denominated Dividends
  • Listed on U.S. Stock Exchanges
  • Low Custody Fee

It is important to determine what percentage of your investment portfolio should be invested in American Depository Receipts (ADRs) based on your investment objectives, risk tolerances and investment time horizon.

Investors are advised to seek competent financial, tax and legal advice concerning the decisions they make with their investments. Klayman & Toskes, P.A. can provide you with a free consultation concerning any securities industry violations related to the handling of your investments accounts by a full-service brokerage firm or registered investment advisor.

Information contained on this webpage is for educational purposes only
and should not be considered legal advice.
No Information contained on this website creates an attorney-client relationship.