What Is Fully Paid Securities Lending? How It Works and What to Know
Fully Paid Securities Lending (FPSL) is a market practice that allows certain stocks and ETFs you fully own to be loaned to other market participants under regulated conditions. While the idea may sound complex at first, the underlying concept is straightforward and has been part of U.S. financial markets for decades.
If you’re new to securities lending, it’s normal to have questions: What happens to your shares? Do you still own them? Can you sell them? When are payments made?
This guide explains how Fully Paid Securities Lending works, what changes when you participate, and what stays exactly the same.
What Is Fully Paid Securities Lending?
Fully Paid Securities Lending is a program that allows securities you have purchased in full—such as stocks or ETFs—to be loaned to other investors.
Even when your securities are loaned out, you remain the owner of the shares. The lending process is handled through your broker as an intermediary and follows U.S. market regulations, including FINRA Rule 4330 and SEC Rule 15c3‑3.
In simple terms, you’re giving permission for eligible securities in your account to be made available for lending, while maintaining ownership.
Why Do Securities Get Borrowed?
Some investors borrow securities for legitimate trading and risk‑management purposes, including trade settlement or maintaining market positions.
Demand varies based on liquidity, market conditions, and how widely available a specific stock or ETF is, meaning not all securities are borrowed.
How the Securities Lending Process Works
When you join the FPSL program, eligible securities in your account may be loaned through Inter as an intermediary.
If a loan occurs, you may earn payments related to that lending activity. These payments depend entirely on market demand and are not guaranteed.
Securities are only loaned when there is market demand. Simply enrolling does not guarantee lending activity.
When Do You Receive Payments?
Payments related to securities lending are credited monthly for periods in which your securities were actually loaned.
If no lending occurs, no payment is made.
All details about loan activity and compensation appear on your month‑end statement.
Because lending depends on market conditions, there is no guarantee that any particular security will be loaned.
What Assets Are Eligible?
Under the FPSL program, certain stocks and ETFs may be loaned. Not all assets or accounts qualify. Eligibility is reviewed during enrollment.
Can You Choose Which Securities Are Loaned?
No. All eligible securities become available for lending when you enroll.
You cannot manually select which securities participate, and lending is automatically based on market demand.
Can You Sell Securities While They Are Loaned?
Yes. You can sell your securities at any time, even if they are currently on loan.
The sale automatically ends the loan, and no additional action is required.
What Happens If a Loaned Security Pays Dividends?
If a loaned security pays a dividend, you receive a payment in lieu of dividends, which is taxed as ordinary income according to market practice and FINRA guidance.
How Much Can You Earn by Lending Your Assets?
Your earnings vary depending on:
- Market supply and demand
- Liquidity
- Borrowing interest for each security
Rates typically range from 0.1% to 5% per year, but can change at any time, and earnings only occur when securities are actively on loan.
This variability reflects FINRA’s requirement for disclosure of compensation structure.
Can You See Lending Rates in Real Time?
Real‑time lending rates are not currently available.
Loan activity and payments can be viewed on your month‑end statement.
How Do I Join the FPSL Program?
You can join via the Inter Securities platform.
At the time of placing a buy or sell order, you will see a pop‑up with program terms.
Your account is reviewed for eligibility, and if approved, participation becomes active automatically.
Do I Need to Take Action After Joining?
No. Once enrolled, eligible securities are automatically made available for lending.
How Can I Leave the FPSL Program?
You can request cancellation at any time by contacting customer support through the Inter app.
How Do I Know Which Securities Are Loaned?
Loaned securities are shown in your month‑end statement.
Real‑time visibility is not currently available.
Important Risk Disclosures
Please read carefully. These risks apply whenever you participate in a Fully Paid Securities Lending program.
1. Loss of SIPC Protection
Loaned securities may not be protected by the Securities Investor Protection Corporation (SIPC).
Under SIPC, customer assets must be in possession of the broker to qualify for protection. Loaned securities are not in the broker’s possession.
2. Loss of Voting Rights
While your securities are on loan, you temporarily lose voting rights.
Voting rights return once the loan ends.
3. Right to Sell Loaned Securities
You keep the ability to sell your loaned securities at any time.
The sale ends the loan automatically.
4. Tax Implications
Payments in lieu of dividends are treated as ordinary income, not qualified dividends.
This may result in a higher tax rate depending on your tax situation. Please contact your tax professional for additional details regarding potential tax implications.
5. Compensation Structure May Change
The amount you earn depends on market conditions and may vary daily.
Rates are not guaranteed and may increase or decrease at any time.
6. Collateral Reliance Risk
If the borrower or intermediary fails to return your securities, collateral posted for the loan may be your only source of recovery, as required under SEC Rule 15c3‑3.
7. Market Demand and Uncertainty
Your securities may not be loaned at all if there is no demand.
Enrollment does not guarantee earnings.
Key Takeaways
FPSL allows eligible stocks and ETFs you fully own to be loaned under regulated conditions.
You may earn compensation, but activity and rates are not guaranteed.
You remain the owner of the securities and can sell them anytime.
Loaned securities may not be SIPC‑protected, and you temporarily lose voting rights.
All loan activity and compensation details appear on your monthly statement.
This content is for informational purposes only and does not constitute an offer or recommendation to buy or sell securities.
Important Risk Disclosures
· Loaned securities may not be protected by SIPC.
· Collateral posted by the broker may be your only protection if securities are not returned.
· You will lose voting rights while securities are on loan.
· Payments in lieu of dividends are taxed as ordinary income.
· Compensation rates vary and may change based on market conditions.
· This program follows FINRA Rule 4330 and SEC Rule 15c3-3.
Regulatory Disclosure
Securities brokerage services provided by Inter Securities LLC ("Inter Securities"), member of FINRA/SIPC, clearing through DriveWealth LLC and Pershing LLC. Inter Securities is a wholly owned subsidiary of Inter US Holding Inc.
Inter Securities provides United States securities brokerage services to customers of Inter Distribuidora de Títulos e Valores Mobiliários Ltda. ("Inter DTVM"), a Brazilian securities dealer authorized by the Brazilian Securities Commission and the Central Bank of Brazil. As per CVM Guidance Opinion nº 33, dated 09.30.2005, Inter Securities entered into an agreement with Inter DTVM through which Inter DTVM intermediates the services of Inter Securities to investors resident, domiciled, or incorporated in Brazil ("Brazil Investors"). The CVM jurisdiction is limited to the Brazilian territory and its supervisory power is limited to Inter DTVM. Inter DTVM’s services should not be understood as an offering of securities directed to Brazil Investors. Brokerage services for assets listed in the United States are provided exclusively through Inter Securities, without interference from Inter DTVM.
This content is for informational purposes only and does not constitute an offer or recommendation to buy or sell securities.
