Firstly I would be surprised if they were doing vetting and due dilligence over and above what a normal broker does before allowing shares to be lent as this is

Firstly I would be surprised if they were doing vetting and due dilligence over and above what a normal broker does before allowing shares to be lent as this is a regulatory requirement. It really is just most likely them ripping off their customers. To answer your question about continuous rebalancing, generally it is done daily using a process known as "Variation Margin"[1], and it's incredibly standard and done by every broker. In order to take out any kind of margin position (and stock borrow is included in this because the reason you would borrow is so you can sell short, which gives you a leveraged position and therefore margin is required) with a broker you post some collateral (usually the assets you already have in the account) and they give you some credit which you can think of as buying power. You can now trade using this rather than just using your cash, however on a daily basis as the present value of your positions changes, if it dips below a limit, they will ask you to post some additional collateral (this is known as a "margin call") and if you can't post, then the broker will begin liquidating your positions to get you back within the limits. So, if you're lending your stock, then someone with that kind of margin arrangement is borrowing them and selling short and Archegos[2] and Peleton[3] are much closer to the situations you need to worry about than FTX and SVB. That is, the risk you are concerned about is that between their margin being adjusted one day and the next, the counterparty who borrowed your stock jumps to default (Meaning they go directly from being fine to being bust in one jump like in Monopoly where it says "Go directly to jail, do not pass go, do not collect $200") before they get asked to post additional collateral or their position gets liquidated (and the stock returned to you). Non-technical explanation: You lent them your stock. What you're worried about is they go bust so quickly that the risk controls don't kick in and now your stock is among assets going through a bankruptcy and it could be ages before you get it back. Notice that in both of the peleton and archegos cases big investment banks with big risk management functions, a ton of inside information and a _lot_ of money at stake lost a ton because they allowed counterparties to take more risk than they should. LTCM would be another great example[4]. RH is going to do a far inferior job of counterparty risk management than they were able to do. Counterparty default is a significant risk, which is why 15% is really inadequate compensation, and you're much better off using someone else. But in my view, RobinHood is a really terrible broker anyway so I would never recommend them. It sort of baffles me that people use them at all. [1] https://www.investopedia.com/terms/v/variationmargin.asp https://www.investopedia.com/terms/v/variationmargin.asp [2] https://www.bloomberg.com/news/features/2021-04-08/how-bill-hwang-of-archegos-capital-lost-20-billion-in-two-days https://www.bloomberg.com/news/features/2021-04-08/how-bill-... [3] https://www.ft.com/content/9995c125-8ac0-3e15-ae52-5c28aca92f88 https://www.ft.com/content/9995c125-8ac0-3e15-ae52-5c28aca92... Fun fact, when I was at Goldman, after peleton went down people used to sometimes refer to counterparty overnight jump-to-default risk informally as "Peleton risk" [4] Read "When Genius Failed" if you're at all interested in the history of financial markets. It's a great book.