Bank of New York Mellon accused of overcharging customers on Forex fees from ADR dividends

Reuters pointed out today that Bank of New York Mellon Corp (NYSE:BK) has been hit with a proposed class action lawsuit accusing it of skimming millions of dollars from clients by overcharging for currency conversions for American Depository Receipt dividends.

Filed on Monday of this week in a Manhattan federal court, the lawsuit accused the world’s biggest custody bank of charging customers more than the actual costs of converting American Depository Receipt (ADR) cash distributions into U.S. dollars and pocketing the higher spread amount as revenue and amounting to less U.S. dollars going to customer accounts.

An American Depositary Receipt (ADR) is a certificate that represents shares of a foreign stock (thus denominated in a foreign currency) owned and issued by a U.S. bank. The foreign shares are usually held in custody overseas, the prices are represented in U.S. dollars on trading exchanges.

The goal is to make it easier for your average investor to be able to invest in foreign firms where otherwise it may be difficult for that customer to get a hold of the original shares on the foreign exchange.

Yesterday, we ran an article highlighting how banks are notorious for not having the greatest cost on Forex fees.

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