4 ms·
> Most broker agreements allow them to lend out your shares without your consent or knowledge. This is straddling the line between completely untrue and highly
by scott00 10y ago
> Most broker agreements allow them to lend out your shares without your consent or knowledge.
This is straddling the line between completely untrue and highly misleading. For cash accounts, brokers cannot lend your shares without a written agreement allowing it. Although the standard agreement could include agreeing to a securities lending program, this is not common in retail brokerage contracts. Additionally, even if that clause was in your contract, they have to notify you whenever they lend your shares. That right to notification CANNOT be waived in the agreement. So if you have a cash account, no one is lending your shares without your knowledge, period.
Even for margin accounts, the same requirements hold for fully paid securities. So if you have a margin account, but you're not actually borrowing any money, no one is lending your shares without your knowledge.
The only case where your broker might lend your securities without your knowledge is when you have a margin account and you are actually borrowing money.
- ohgoshgolly 10y ago> brokers cannot lend your shares without a written agreement allowing it. Just read my brokers agreement - they can indeed lend my shares without notifying me for any purpose.
- snowwrestler 10y ago> even if that clause was in your contract, they have to notify you whenever they lend your shares. That right to notification CANNOT be waived in the agreement.
- scott00 10y agoYou didn't mention whether it was a cash account or a margin account, or if there's an exception for fully paid securities. If it's a margin account, that is indeed how it works for non-fully paid securities. If it's a cash account, or there's no exception for fully paid securities, regulators will probably not view that agreement favorably. You can file a complaint at https://www.sec.gov/complaint/tipscomplaint.shtml https://www.sec.gov/complaint/tipscomplaint.shtml. In my experience, they actually read and act on complaints. (Well, at least small easy to investigate ones... ones requiring a lot of investigatory work like the Madoff case are a different story.) The relevant regulation is 17 CFR §240.15c3-3, paragraphs b(1), b(3), and b(3)ii. (http://www.ecfr.gov/cgi-bin/text-idx?SID=f07570958d348a3f75d9c979186842b8&mc=true&node=se17.4.240_115c3_63&rgn=div8 http://www.ecfr.gov/cgi-bin/text-idx?SID=f07570958d348a3f75d...)