What are the risks associated with stock lending?

Your lent shares are secured with collateral in the form of US Treasury Bonds, valued between 100% to 105% of the lent inventory end of day value. However, there are still some risks associated with the practice.

• When selling your shares, there could be occasional instances where settlement of your sale takes longer than the usual timeframe. If this occurs, you won’t be able to withdraw the sale proceeds from your account until the settlement is confirmed.
• Lent-out shares are typically used for shorting. So if your shares are being lent, they are likely being shorted, possibly affecting their value.
• If your shares are out on loan, you are transferring the right to vote on any voluntary corporate actions to the borrower. So, if all of your shares on a particular asset are out on loan, you won’t receive any emails from our proxy voting partner, Broadridge, during the loan period.
• Dividends are paid to you by the borrower as payments known as ‘manufactured dividends’. In some jurisdictions, these are taxed differently from normal dividends, and you should consult with a tax advisor about what to report to your local tax authority.
• Share Lending transactions indirectly expose you to counterparty credit risk. This is when a counterparty, the Lending Agent or the Borrower of your shares, does not fulfil their obligation to return your shares.
• A decrease in the value of collateral or an increase in the value of loaned shares, due to market movements or the initiation of new loans, since the last collateral adjustment, may lead to insufficient collateral coverage for your loaned positions.

All key risks are detailed within the opt-up process.  Please bear in mind that Stock Lending is not risk free, so be sure to read and understand all relevant risk disclosures, and only proceed if you are comfortable with the risks.