The SEC’s Office of Investor Education and Advocacy

Investor Bulletin: 
American Depositary Receipts
The SEC’s Office of Investor Education and Advocacy 
is issuing this Investor Bulletin to educate investors 
about American Depositary Receipts (“ADRs”).  An 
ADR is a security that represents shares of non-U.S. 
companies that are held by a U.S. depositary bank 
outside the United States (“U.S.”).   
 
What is an ADR? 
ADRs allow U.S. investors to invest in non-U.S. 
companies and give non-U.S. companies easier access 
to the U.S. capital markets.  Many non-U.S. issuers use 
ADRs as a means of raising capital or establishing a 
trading presence in the U.S.  The non-U.S. company 
may sometimes be referred to as a “foreign private 
issuer.”  The first ADR was created in 1927 by a U.S. 
bank to allow U.S. investors to invest in shares of a 
British department store.  Today, there are more than 
2,000 ADRs available representing shares of companies 
located in more than 70 countries.   
An ADR is a negotiable certificate that evidences an 
ownership interest in American Depositary Shares 
(“ADSs”) which, in turn, represent an interest in 
the shares of a non-U.S. company that have been 
deposited with a U.S. bank.  It is similar to a stock 
certificate representing shares of stock.  The terms 
ADR and ADS are often used interchangeably by 
market participants.  ADRs trade in U.S. dollars 
and clear through U.S. settlement systems, allowing 
ADR holders to avoid having to transact in a foreign 
currency.   
An ADR may represent the underlying shares on 
a one-for-one basis, or may represent a fraction of 
a share or multiple shares.  For example, for one 
company, an ADR may represent several shares of 
the underlying security, while for another company, 
an ADR may represent a fraction of the underlying 
security.  The use of a ratio allows ADRs to be priced 
at an amount more typical of U.S. market share prices.  
ADRs are created by a depositary bank when the 
non-U.S. company, or an investor who already holds 
the underlying non-U.S. securities, delivers them to 
the bank or its custodian in the non-U.S. company’s 
home country.  The bank will issue ADRs to the 
investor in the U.S. and the investor will be able to 
re-sell the ADRs on a U.S. exchange or the over-the-
counter market.  ADR holders may also surrender 
ADRs in exchange for receiving the shares of the 
non-U.S. company.  These transactions are generally 
performed by brokers and other types of investors 
who are active in foreign securities markets.   
 ADRs may be “sponsored” or “unsponsored.”  
Sponsored ADRs are those in which the non-U.S. 
company enters into an agreement directly with the 
U.S. depositary bank to arrange for recordkeeping, 
Investor Assistance (800) 732-0330
       www.investor.gov
1

forwarding of shareholder communications, payment 
of dividends, and other services.  An unsponsored 
ADR is set up without the cooperation of the non-
U.S. company and may be initiated by a broker-
dealer wishing to establish a U.S. trading market.  An 
ADR, however, may not be established unless the 
non-U.S. company is either subject to the reporting 
requirements under the Securities Exchange Act of 
1934 or is exempt under the Act.    
ADRs are always registered with the SEC on a Form 
F-6 registration statement.  Disclosure under Form 
F-6 relates only to the contractual terms of deposit 
under the deposit agreement and includes copies of 
the agreement, a form of ADR certificate, and legal 
opinions.  A Form F-6 contains no information about 
the non-U.S. company.  If a foreign company with 
ADRs wishes to raise capital in the United States, it 
would separately file a registration statement on Form 
F-1,  F-3,  or F-4.  If a foreign private issuer seeks to list 
ADRs on a U.S. stock exchange, it would separately 
file with the SEC a registration statement on Form 
20-F.  Registration statements used to raise capital 
or list ADRs on an exchange are required to contain 
extensive financial and non-financial information 
about the issuer.   
Market participants have generally categorized ADRs 
into three “levels,” depending on the extent to which 
the foreign company has accessed the U.S. markets: 
Level 1 ADR programs establish a trading presence 
but may not be used to raise capital.  It is the only 
type of facility that may be unsponsored and, as a 
result, may be traded only on the over-the-counter 
market.    Form F-6 would be the only form 
required to be filed.  No information about the 
issuer would be available on the SEC’s EDGAR 
system; information should be available on the 
issuer’s website. 
Level 2 ADR programs establish a trading presence 
on a national securities exchange but may not be 
used to raise capital.  Again, Form F-6 would be 
used to register the ADRs.  The non-U.S. company 
is required to register and file annual reports on 
Form 20-F with the SEC.
Level 3 ADR programs may be used not only to 
establish a trading presence, but also to raise capital 
for the foreign issuer.  A registration statement 
on Form F-1, Form F-3, or Form F-4 would be 
filed in order to offer the ADRs.  The non-U.S. 
company would be required to also file annual 
reports on Form 20-F.
What fees are charged to ADR 
investors? 
As a matter of course, an ADR depositary bank may 
be authorized under the deposit agreement relating 
to the ADRs to charge a fee, called a custody fee, for 
the work it performs on the ADR.  ADR depositary 
banks charge holders of ADRs custody fees, sometimes 
referred to as Depositary Services Fees, to compensate 
the depositary banks for inventorying the non-U.S. 
shares and performing registration, compliance, 
dividend payment, communication, and recordkeeping 
services. 
A common practice for collection of the custody 
fee is for the ADR depositary bank to subtract the 
amount of the fee from the gross dividends paid by 
the bank to ADR holders.  Typically,  the Depository 
Trust Company, (DTC) will announce both the gross 
dividend rate and the net dividend rate after deduction 
of the ADR custody fee.  The ADR depositary banks 
pay DTC the net dividend, and DTC allocates the 
net dividend to its users.  However, a number of ADR 
issues do not pay periodic dividends, which prevents 
the fees from being collected through the above-
described mechanism.  In this case, DTC charges the 
fee to its users (i.e., banks and broker-dealers) who pass 
them on to their customers. 
Depositary banks may charge other fees, such as 
relating to the distribution of dividends, foreign 
currency exchange, voting of shares, and other matters.  
Investor Assistance (800) 732-0330
 www.investor.gov
2

What should investors do before 
investing in ADRs? 
Like any other investment, you should learn as 
much as you can about a company before you 
invest.  Research the political, economic, and social 
conditions in the company’s home country so you 
will understand better the factors that affect the 
company’s financial results and stock price.  You should 
understand that non-U.S. companies are subject 
to financial and other disclosure requirements that 
differ from those required of U.S. public companies.  
Except for the annual report on Form 20-F, non-U.S. 
companies are generally only required to disclose what 
is required in their home country.  Any disclosure may 
also not be as extensive or comparable to that of U.S. 
public companies.  
 
Prior to investing in an ADR, investors should ask 
their broker-dealer what fees are charged to them as 
ADR investors.  Typically, fees are assessed per ADR.  
For example, 1000 ADRs could be assessed a fee 
ranging from $20 to $50.  Investors should review the 
fees reported in the Form F-6 registration statement 
under the Securities Act of 1933 available through 
the SEC’s web site at www.sec.gov/edgar.shtml at 
no charge.  Fees can be viewed in the section of the 
registration statement typically titled, “Description 
of American Depository Shares” or “Description 
of American Depository Receipts.”  The websites 
of depositary banks that are active in the U.S. also 
contain information about investing in ADRs and 
serve as a source of information for investors.
 
2
 
RELATED INFORMATION 
For more information on ADRs and 
international investing, please visit the SEC’s 
ADR Fast Answer and read our publication 
on the basics of international investing, which 
covers the risks of investing internationally and 
how to get more information about foreign 
companies and markets.
The Office of Investor Education and Advocacy 
has provided this information as a service to 
investors.  It is neither a legal interpretation nor 
a statement of SEC policy.  If you have questions 
concerning the meaning or application of a 
particular law or rule, please consult with an 
attorney who specializes in securities law.
Investor 
Assistance (800) 732-0330
August 2012
3

Investor Bulletin: 
American Depositary Receipts

The SEC’s Office of Investor Education and Advocacy 
is issuing this Investor Bulletin to educate investors 
about American Depositary Receipts (“ADRs”).  An 
ADR is a security that represents shares of non-U.S. 
companies that are held by a U.S. depositary bank 
outside the United States (“U.S.”).   
 

What is an ADR? 

ADRs allow U.S. investors to invest in non-U.S. 
companies and give non-U.S. companies easier access 
to the U.S. capital markets.  Many non-U.S. issuers use 
ADRs as a means of raising capital or establishing a 
trading presence in the U.S.  The non-U.S. company 
may sometimes be referred to as a “foreign private 
issuer.”  The first ADR was created in 1927 by a U.S. 
bank to allow U.S. investors to invest in shares of a 
British department store.  Today, there are more than 
2,000 ADRs available representing shares of companies 
located in more than 70 countries.   

An ADR is a negotiable certificate that evidences an 
ownership interest in American Depositary Shares 
(“ADSs”) which, in turn, represent an interest in 
the shares of a non-U.S. company that have been 
deposited with a U.S. bank.  It is similar to a stock 
certificate representing shares of stock.  The terms 
ADR and ADS are often used interchangeably by 

market participants.  ADRs trade in U.S. dollars 
and clear through U.S. settlement systems, allowing 
ADR holders to avoid having to transact in a foreign 
currency.   

An ADR may represent the underlying shares on 
a one-for-one basis, or may represent a fraction of 
a share or multiple shares.  For example, for one 
company, an ADR may represent several shares of 
the underlying security, while for another company, 
an ADR may represent a fraction of the underlying 
security.  The use of a ratio allows ADRs to be priced 
at an amount more typical of U.S. market share prices.  

ADRs are created by a depositary bank when the 
non-U.S. company, or an investor who already holds 
the underlying non-U.S. securities, delivers them to 
the bank or its custodian in the non-U.S. company’s 
home country.  The bank will issue ADRs to the 
investor in the U.S. and the investor will be able to 
re-sell the ADRs on a U.S. exchange or the over-the-
counter market.  ADR holders may also surrender 
ADRs in exchange for receiving the shares of the 
non-U.S. company.  These transactions are generally 
performed by brokers and other types of investors 
who are active in foreign securities markets.   

 ADRs may be “sponsored” or “unsponsored.”  
Sponsored ADRs are those in which the non-U.S. 
company enters into an agreement directly with the 
U.S. depositary bank to arrange for recordkeeping, 

Investor Assistance (800) 732-0330        www.investor.gov

1



forwarding of shareholder communications, payment 
of dividends, and other services.  An unsponsored 
ADR is set up without the cooperation of the non-
U.S. company and may be initiated by a broker-
dealer wishing to establish a U.S. trading market.  An 
ADR, however, may not be established unless the 
non-U.S. company is either subject to the reporting 
requirements under the Securities Exchange Act of 
1934 or is exempt under the Act.    

ADRs are always registered with the SEC on a Form 
F-6 registration statement.  Disclosure under Form 
F-6 relates only to the contractual terms of deposit 
under the deposit agreement and includes copies of 
the agreement, a form of ADR certificate, and legal 
opinions.  A Form F-6 contains no information about 
the non-U.S. company.  If a foreign company with 
ADRs wishes to raise capital in the United States, it 
would separately file a registration statement on Form 
F-1, F-3, or F-4.  If a foreign private issuer seeks to list 
ADRs on a U.S. stock exchange, it would separately 
file with the SEC a registration statement on Form 
20-F.  Registration statements used to raise capital 
or list ADRs on an exchange are required to contain 
extensive financial and non-financial information 
about the issuer.   

Market participants have generally categorized ADRs 
into three “levels,” depending on the extent to which 
the foreign company has accessed the U.S. markets: 

Level 1 ADR programs establish a trading presence 
but may not be used to raise capital.  It is the only 
type of facility that may be unsponsored and, as a 
result, may be traded only on the over-the-counter 
market.  Form F-6 would be the only form 
required to be filed.  No information about the 
issuer would be available on the SEC’s EDGAR 
system; information should be available on the 
issuer’s website. 

Level 2 ADR programs establish a trading presence 
on a national securities exchange but may not be 
used to raise capital.  Again, Form F-6 would be 
used to register the ADRs.  The non-U.S. company 
is required to register and file annual reports on 
Form 20-F with the SEC.

Level 3 ADR programs may be used not only to 
establish a trading presence, but also to raise capital 
for the foreign issuer.  A registration statement 
on Form F-1, Form F-3, or Form F-4 would be 
filed in order to offer the ADRs.  The non-U.S. 
company would be required to also file annual 
reports on Form 20-F.

What fees are charged to ADR 
investors? 

As a matter of course, an ADR depositary bank may 
be authorized under the deposit agreement relating 
to the ADRs to charge a fee, called a custody fee, for 
the work it performs on the ADR.  ADR depositary 
banks charge holders of ADRs custody fees, sometimes 
referred to as Depositary Services Fees, to compensate 
the depositary banks for inventorying the non-U.S. 
shares and performing registration, compliance, 
dividend payment, communication, and recordkeeping 
services. 

A common practice for collection of the custody 
fee is for the ADR depositary bank to subtract the 
amount of the fee from the gross dividends paid by 
the bank to ADR holders.  Typically,  the Depository 
Trust Company, (DTC) will announce both the gross 
dividend rate and the net dividend rate after deduction 
of the ADR custody fee.  The ADR depositary banks 
pay DTC the net dividend, and DTC allocates the 
net dividend to its users.  However, a number of ADR 
issues do not pay periodic dividends, which prevents 
the fees from being collected through the above-
described mechanism.  In this case, DTC charges the 
fee to its users (i.e., banks and broker-dealers) who pass 
them on to their customers. 

Depositary banks may charge other fees, such as 
relating to the distribution of dividends, foreign 
currency exchange, voting of shares, and other matters.  

Investor Assistance (800) 732-0330  www.investor.gov

2

http://www.sec.gov/about/forms/formf-6.pdf
http://www.sec.gov/about/forms/formf-6.pdf
http://www.sec.gov/about/forms/formf-1.pdf
http://www.sec.gov/about/forms/formf-1.pdf
http://www.sec.gov/about/forms/formf-3.pdf
http://www.sec.gov/about/forms/formf-4.pdf
http://www.sec.gov/about/forms/form20-f.pdf
http://www.sec.gov/about/forms/form20-f.pdf
http://www.sec.gov/divisions/marketreg/mrotc.shtml
http://www.sec.gov/divisions/marketreg/mrotc.shtml


What should investors do before 
investing in ADRs? 

Like any other investment, you should learn as 
much as you can about a company before you 
invest.  Research the political, economic, and social 
conditions in the company’s home country so you 
will understand better the factors that affect the 
company’s financial results and stock price.  You should 
understand that non-U.S. companies are subject 
to financial and other disclosure requirements that 
differ from those required of U.S. public companies.  
Except for the annual report on Form 20-F, non-U.S. 
companies are generally only required to disclose what 
is required in their home country.  Any disclosure may 
also not be as extensive or comparable to that of U.S. 
public companies.  
 
Prior to investing in an ADR, investors should ask 
their broker-dealer what fees are charged to them as 
ADR investors.  Typically, fees are assessed per ADR.  
For example, 1000 ADRs could be assessed a fee 
ranging from $20 to $50.  Investors should review the 
fees reported in the Form F-6 registration statement 
under the Securities Act of 1933 available through 
the SEC’s web site at www.sec.gov/edgar.shtml at 
no charge.  Fees can be viewed in the section of the 
registration statement typically titled, “Description 
of American Depository Shares” or “Description 
of American Depository Receipts.”  The websites 
of depositary banks that are active in the U.S. also 
contain information about investing in ADRs and 
serve as a source of information for investors.

 

2

 
RELATED INFORMATION 

For more information on ADRs and 
international investing, please visit the SEC’s 
ADR Fast Answer and read our publication 
on the basics of international investing, which 
covers the risks of investing internationally and 
how to get more information about foreign 
companies and markets.

The Office of Investor Education and Advocacy 
has provided this information as a service to 
investors.  It is neither a legal interpretation nor 
a statement of SEC policy.  If you have questions 
concerning the meaning or application of a 
particular law or rule, please consult with an 
attorney who specializes in securities law.

Investor Assistance (800) 732-0330 August 2012

3

http://www.sec.gov/edgar.shtml
http://www.sec.gov/answers/adrs.htm
http://www.sec.gov/investor/pubs/ininvest.htm