Shedding Light on Hidden Costs: MCA’s Depository Service Fees (DSF) Offering

ADRs and GDRs open doors to global investing-but hidden costs often erode returns. Depository Service Fees (DSFs), quietly deducted by custodians even when no dividends are paid, are poorly disclosed and vary across banks and programs. While the per-share fee may seem small (typically $0.01–$0.03 annually), given the size of the ADR market, these per-share fees likely accumulate into hundreds of millions of dollars in investor costs annually.

Adding to these concerns, official depository notices released in mid-2024 for an ADR program of a leading e-commerce platform indicated that the annual custody fee was increased from $0.02 to $0.03 per share, despite no dividend being declared during the period. This demonstrates how administrative and custody-related costs tied to depository receipt programs can quietly rise - even in the absence of income distributions - making it essential for investors to stay vigilant about fee disclosures.

As complexities around the administration and servicing of Depository Receipt (DR) programs continue to grow, understanding and monitoring Depository Service Fees (DSFs) has become more important than ever to maintain transparency and protect investment returns.

However, with increasing complexities around the administration and servicing of DR programs, staying informed about the associated Depository Service Fees (DSF) is more important than ever.

Understanding Depository Receipts and Fees

There are four major depository banks that facilitate the issuance and processing of DRs:

• Citibank
• BNY Mellon
• Deutsche Bank
• JP Morgan

These institutions charge Depository Service Fees to cover costs related to the maintenance, administration, and support of DR programs. Over recent years, these operational costs have increased, making fee transparency crucial for investors and custodians alike.

The Transparency Gap

Despite the growing significance of DRs, there is currently no centralized mechanism in the marketplace to track and publish these depositories service fees in real time. This lack of visibility often leads to reconciliation challenges and missed automation opportunities for institutions managing DR portfolios.

• Banks: Without a standardized view, global banks struggle to reconcile DSF deductions. For example, a large European Bank reported client statement breaks after missing fee notices from multiple depositaries.
• Asset Managers: For funds holding large ADR positions, DSFs can materially impact NAV. One U.S. hedge fund managing $500M in ADRs estimated losing over $1M annually in untracked fees.
• Broker Platforms: Retail brokers face service escalations when clients discover unexplained deductions. A U.S. platform received repeated complaints after $0.02/share fees on NIO ADRs showed up without warning.

Just as important as transparency is timeliness: when DSF announcements are delayed or fragmented, custodians are left chasing reconciliation breaks, asset managers risk misstated NAVs, and brokers face angry retail clients blindsided by unexplained deductions-turning what should be a routine fee into a source of operational risk and reputational damage.

MCA DSF: Closing the Gap

S&P Global Market Intelligence’s Managed Corporate Actions (MCA) Depository Service Fees (DSF) Service is designed to close this industry gap by delivering timely, accurate, and structured information related to non-dividend service fees charged by depositaries.

Key Features

• Centralized Fee Visibility – Real-time access to DSF notices issued by all major depository banks.
• Structured & Standardized Data – Delivered in proprietary, ISO 15022, and ISO 20022 formats for seamless automation.
• Detailed Corporate Action Notices – Including fee amount, record date, depository name, and security identifiers.
• Enhanced Reconciliation & Automation – Supports accurate reconciliation and downstream process automation, reducing cost and risk.

How It Works

• Once subscribed, clients receive depository service fee updates as part of the corporate action feed. All key indicators are provided, including fee type (Annual Service Fee, Operational Service Fee, Maintenance Service Fee, Administrative Service Fee).
• Updates follow MCA’s existing high-quality delivery protocols, with data sourced directly from depository banks for accuracy, reliability, and auditability.

Unlocking Transparency for a Hidden Cost

Depository service fees may be a small line item on a statement, but globally they represent a significant-and often opaque-cost burden. With the MCA DSF offering, firms across the value chain gain visibility into these fees: custodians can reconcile more efficiently, asset managers can ensure accurate NAV, and brokers can improve client trust.

By unlocking transparency into DSFs, MCA empowers firms to cut hidden costs, strengthen reconciliation, and automate workflows. For investors and custodians alike, clarity is no longer optional-it’s essential.