Term in Private Securities-collateralized Lending
The term "securities lending" is sometimes used erroneously in the same context as a "stock loan" or individual "securities-collateralized loan". The former refers to the actual lending typically of banks or brokerages to other institutions to cover short sales or for other temporary purposes. The latter is used in private or institutional securities-backed loan arrangements across a wide spectrum of securities. In recent years, FINRA has cautioned all consumer to avoid nonrecourse transfer-of-title stock loans, but they enjoyed a brief popularity before the SEC and IRS came to shut almost all such providers down between 2007-2011, reclassifying nonrecourse transfer-of-title title stock loans as fully taxable sales at inception. Today, it is widely accepted that the only legally valid consumer lending programs involving stocks or other securities are those in which the stocks remain in the client's title and account without sale through a fully licensed and regulated institution with membership in the SIPC, FIDC and other mainline regulatory organizations.
Other alternatives include working with a reputable provider of securities loans willing to provide references, track record of successful transactions completed, and process of funding the loans and returning the collateral. In 2011, the Financial Industry Regulatory Authority (FINRA) issued an investor alert on stock-based loan programs. In the alert, FINRA recommend investors ask questions, including: 1)What happens to my stock once I pledge it as collateral? 2) What benefit does the promoter receive for recommending the program? And 3) Does the lender have audited financials?
The Equities First Holdings (EFH) Executive Lending Survey conducted in June 2012 found that 57% of the 400 respondents said they would recommend a securities-based loan to a close friend for personal or professional use. In that same survey, 47% of those polled said that low interest rates are an important feature of securities-based loans.
Read more about this topic: Securities Lending
Famous quotes containing the words term, private and/or lending:
“In eloquence, the great triumphs of the art are when the orator is lifted above himself; when consciously he makes himself the mere tongue of the occasion and the hour, and says what cannot but be said. Hence the term abandonment, to describe the self-surrender of the orator.”
—Ralph Waldo Emerson (1803–1882)
“The world still wants its poet-priest, a reconciler, who shall not trifle with Shakspeare the player, nor shall grope in graves with Swedenborg the mourner; but who shall see, speak, and act, with equal inspiration. For knowledge will brighten the sunshine; right is more beautiful than private affection; and love is compatible with universal wisdom.”
—Ralph Waldo Emerson (1803–1882)
“And lending it one mental fillip the more, the fact that all these people were inwardly attacked by well-nigh resistless decay, and that most of them were feverish.”
—Thomas Mann (1875–1955)