As promised in the Space last Friday, 5 Bullet Points for comments on S7-18-21 (SEC proposed Rule 10c-1). Real reform for securities lending must include:
(1) Notifying public about who is borrowing & lending shares (not just which company’s shares are borrowed or lent),
(1) Notifying public about who is borrowing & lending shares (not just which company’s shares are borrowed or lent),
(2) Notifying retail investors that their shares are being lent, (because (a) they don't get to vote & (b) they don't get tax-qualified dividends),
(3) Sharing any revenue earned from lending their shares with retail investors,
(3) Sharing any revenue earned from lending their shares with retail investors,
(4) Eliminate “Onward Lending” completely (public companies & transfer agents have opposed this for decades),
(5) Require every loan to have a due date (not “if applicable”).
(5) Require every loan to have a due date (not “if applicable”).
Finally, it seems likely that Proposed Rule will increase cost and reporting burden of borrowing stock for any reason (cover short sales, close fail-to-deliver, access voting rights, etc.). Unintended consequence may be to tilt broker’s cost/benefit analysis in favor of fails.
Rule (including instructions for submitting comments) & summary factsheet: sec.gov/news/press-rel…
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