Overview
Frequently Asked Questions
Field Definitions
View details pertaining to an account's participation in the Fully Paid Lending Program. Details include:
For the participating account, a Master Securities Lending Agreement (MSLA) must be received by Fidelity. In addition:
In the Security ID column, choose a link and select Loaned Securities.
Note
Alternatively, in the Security ID column, select the LOAN
indicator next to the loaned position.
Note
This information is intended to be educational and is not tailored to the
investment needs of any specific investor.
Fidelity's Fully-Paid Lending Program allows a customer to lend certain fully-paid or excess margin securities. In return, the customer gains the opportunity to earn incremental income on their portfolio through the securities lending market.
TopIn a fully-paid loan, a customer lends a specific security (or securities) to Fidelity. In return, the customer receives collateral in the form of cash and/or securities held at a custodial bank independent of Fidelity. In addition, the customer receives an interest rate-based lending fee, which is calculated by multiplying the current Lending Interest Rate by the contract value of the securities on loan. The lending fee accrues daily and is credited monthly to the account. The duration of the loan is typically indefinite, and the loan may remain open until either the customer or Fidelity elects to close it. The customer can end participation in the Fully-Paid Program at any time by contacting Fidelity to recall the loan or by selling the securities. The existence of the loan does not restrict the customer from selling the securities at any time. However, the sale of the securities will terminate that particular loan. Fidelity is not obligated to borrow securities at any time, may borrow securities held, and enrollment in the program does not guarantee that the securities will be borrowed.
Note
Securities on loan are not covered under the provisions of the Securities Investor
Protection Act of 1970 (SIPC).
Under the terms of a Master Securities Lending Agreement (MSLA), which the customer executed prior to participating in the Program, the customer maintains economic ownership of the securities on loan and may recall the loan at any time. The customer may also sell securities on loan at any time online or through a representative. Securities on loan are available to sell online from the cash account type. To sell the entire cash position, including shares on loan, the customer should specify the total quantity to sell rather than use the Sell All Shares function.
Under the MSLA, the customer relinquishes the ability to exercise voting rights for securities on loan. To act on an upcoming proxy vote, the customer must contact Fidelity with instructions to return the securities prior to the record date of the proxy vote. Fidelity will recall the securities on loan and will attempt, on a best-efforts basis, to return them to the account prior to the record date of the proxy vote. The MSLA governs all loan transactions and gives Fidelity the right to borrow fully-paid and excess-margin securities from the customer's account. It is a separate agreement from any previously executed margin agreement and the borrowing of securities under the MSLA is a separate process from rehypothecation.
Note
The Fidelity Fully-Paid Lending Program is only a means for increased income on certain
securities and does not provide any downside protection or hedge against the customer's
lending position(s) or portfolio. Securities on loan are available to sell online from
the cash account type. Positions held in cash must be sold separately from positions
held in margin. Proceeds from sales of securities on loan may not be immediately available
for new purchases.
Distributions paid on securities borrowed by Fidelity pursuant to the Fully-Paid Lending Program will be credited to the account in the form of a cash-in-lieu payment. Receipt of cash-in-lieu payments may have different taxable consequences than receipt of the actual dividends from the issuer.
Note
Fidelity does not provide legal or tax advice. Consult with an attorney or tax professional
regarding any specific legal or tax situation.
To help offset the potential tax burden associated with the receipt of cash-in-lieu payments in place of qualified dividends (as defined in Jobs & Growth Tax Relief Reconciliation Act of 2003), Fidelity will credit participating accounts with an additional credit adjustment equal to 26.98% of the qualified portion of the distribution. This adjustment will occur annually after all reclassification information is made available.
Note
The credit adjustment percentage may be increased or decreased from time to time by Fidelity
due to changes in federal and/or state tax law and the classification of the dividend
distribution. Fidelity does not guarantee that this adjustment will be sufficient to eliminate
the full additional tax burden associated with all dividend distributions. Fidelity reserves
the right to deny credit adjustments to any customer that Fidelity determines would have been
otherwise ineligible to receive the tax benefit of a reduced dividend tax rate.
The Lending Interest Rate is based on several factors including borrowing demand, the overall lendable supply of the security, short-selling and hedging interest, and general market conditions and is therefore subject to change. View the current Lending Interest Rate online by clicking the information flag next to the security in the Positions grid. Customers will receive a confirmation from Fidelity if the Lending Interest Rate changes. Additional information about the rates can be found in the Master Securities Lending Agreement (MSLA) signed by the customer upon enrolling in the program or by contacting Fidelity.
Fidelity may receive compensation in connection with the use of the loaned securities, including lending the securities to other parties or facilitating the settlement of short sales. Fidelity may relend Loaned Securities to third-party borrowers on a principal basis, in which case, compensation for the applicable loan will be the fees paid to Fidelity by the third-party borrower less the lending fee paid to the customer.
TopAll securities on loan will be reflected in the Positions section of the customer's account statement and will continue to contribute to the Total Account Value. The customer can also see the details of positions on loan in the Loaned Securities page.
TopThe customer can see all lending in the Investment Activity section of the account statement. This will include new loans, loan returns, loan rate changes, collateral adjustments, and the monthly interest credits.
The customer will also receive an online, monthly Fully-Paid Lending Program statement detailing the daily contract value, Lending Interest Rate, and accrual for each security on loan, as well as the total amount of the lending fee credited to the Fidelity account for that month.
The customer can also view all lending activity on the Account History page. This will include new loans, loan returns, collateral adjustments, and the monthly interest credits.
The customer can also view details of positions on loan by selecting the Loan indicator next to the security on the Positions page or by selecting Loaned Securities. The customer can see which securities are currently on loan, the Lending Interest Rate earned on each loaned position, as well as the collateral provided for each loaned security.
TopAll securities on loan will be reflected in the Positions section of the customer's statement, and all activity will be reflected in the Investment Activity section. Additionally, the customer will receive a monthly Fully-Paid Lending Program statement detailing the daily contract value, Lending Interest Rate, and lending fee accrual for each security on loan, as well as the total amount of the lending fee credited to the Fidelity account for that month.
TopOn the day the securities are borrowed, the customer will receive a confirmation detailing the position being loaned, the initial Lending Interest Rate on the loan, the custodial bank holding collateral, and the value of that collateral. In addition, if the Lending Interest Rate changes, the customer will receive a trade confirmation detailing the change.
TopFully-paid securities on loan to Fidelity are treated as cash positions for the purposes of regulatory margin calculations (Fed and Exchange requirements). Options positions written against a position on loan will be considered uncovered from a margin standpoint. However, the value of the positions on loan may still be used towards house margin requirements.
TopOn settlement date of the fully-paid loan, the collateral will appear as a new position in the customer's Fidelity account. The collateral value does not contribute to the market value calculated for the account and is not a marginable security. Fidelity will send a confirmation for the original amount of the collateral against the fully-paid loan.
On a daily basis, Fidelity will adjust the collateral position for the customer to maintain adequate collateral in the account (e.g., marks-to-market on the loan position(s), changes to the quantity of the loan position(s), etc.). Each time a change is made to the collateral, Fidelity will send a confirmation to the customer setting forth the incremental change to the collateral value.
TopFidelity will provide collateral to a third-party custodial bank, and the bank will hold the collateral in cash or cash-equivalent form. However, according to the terms of the MSLA and applicable law, the only securities that will be permitted to serve as collateral will be those securities that are allowable investments under Rule 15c3-3 of the Securities Exchange Act of 1934. These include U.S. Treasury bills and notes, negotiable bank certificates of deposit, and other securities approved by the U.S. Securities and Exchange Commission that have similar characteristics in terms of liquidity, volatility, market depth and location, and the issuer's creditworthiness.
TopThe principal risk in any securities lending transaction is counterparty default. Fidelity is the customer's counterparty on all fully-paid lending transactions. If Fidelity were to default on its obligations as defined in the MSLA, the customer would have the right to withdraw the collateral from the collateral account at the custodial bank by contacting the bank in the manner described in the agreements. In the event the customer makes a withdrawal request, the bank will transfer an amount equal to the current collateral amount (or such lesser amount as the customer may have requested). If the customer were to choose to use the collateral proceeds to repurchase the same type of securities that were on loan and not returned, this would be considered a new purchase and a potentially taxable event.
As described above, the customer relinquishes voting rights on borrowed securities and distributions paid on loaned securities are credited to the account in the form of a cash-in-lieu or substitute payment. Additional risks include that during the life of the loan, the securities are not covered by Securities Investor Protection Corporation (SIPC).
Note
Fidelity does not provide legal or tax advice. Consult with an attorney or tax professional
regarding any specific legal or tax situation.
For more information, the customer should contact Fidelity.
| Field | Definition |
|---|---|
| Closing Market Value | The market value of the position as calculated using the price as of the last closing date and the position quantity at that time; truncated at two decimal places. Because of this truncation, Closing Market Value may differ from Recent Market Value by a penny for inactive securities or during non-market hours. There is a total for this column below the table. Closing Quantity x Closing Price |
| Description | The full name for the security that corresponds to its CUSIP or symbol. |
| Interest Rate % | For securities on loan, the rate displayed is the current average rate of all shares of the security on loan. The rate is subject to change over the duration of the loan. |
| Recent Market Value | The market value of the position as calculated using the recent price and the updated position quantity. There is a total for this column below the table. Factored positions calculate this value in the following manner: (Recent Quantity x Factor) x Recent Price ÷ 100 |
| Recent Quantity | The updated position quantity or number of units. |
| Total Collateral for Loaned Positions | CUSIP
Amount
|
712984.4.0