In a securities lending program, the borrower (a financial institution like a bank or brokerage firm) will review your portfolio to determine which securities are eligible for borrowing. We host several round table peer-sharing events, two major conferences, three industry training programs, and one major forum. Risk Management. The risks associated with a securities lending program can be complex to identify and measure. 2. All investment strategies involve risk, including securities lending. You can sell loaned securities or end loans at any time. Another risk to the lender could be that the borrower becomes insolvent and is unable to return the borrowed security. 1 To the extent that a fund seeks to lend its portfolio securities to affiliated borrowers, or to compensate an affiliated lending agent with a share of the lending program's revenues, exemptive relief from the Commission may be required. Securities Lending Risks. to participate in the Securities Lending Fully Paid program. Best Practices. The level of risk in securities lending can usually be tailored to a beneficial owner depending on the level of risk they are willing to accept. As a lender, the main risk is that the value of the collateral decreases below the cost of the security that was lent out. Below are some, but not necessarily all, of the risks lender may be exposed to when participating in securities lending programs. Securities lending aims to generate additional income for a fund, subject to the risks outlined in the following section and in the funds’ prospectus. In evaluating a securities lending program, fund sponsors should focus on the ability of the lending agent to mitigate the risks of cash collateral impairment and liquidity as well as counterparty exposure. Below are the primary risks in securities lending, how these risks can be mitigated and how beneficial owners can monitor their own program. Securities Lending provides products and services to The Risk Management Association member institutions involved in agent lending functions within the securities-based lending industry. Are all of your risks truly addressed? Investors should understand and consider three primary types of risk associated with securities lending: Reinvestment risk derives from the reinvestment of cash collateral received to secure a loan. When you enroll in the Securities Lending Fully Paid (SLFP) program, you can receive monthly income for lending your fully paid securities1 to Schwab. With Securities Lending there is a risk of loss should the borrower default before the securities are returned, and due to market movements, the value of collateral held has fallen and/or the value of the securities on loan has risen. Cash Collateral Reinvestment Risk – Cash must be reinvested to earn a higher rate of return than the manufactured interest paid from the lender to borrower (creating a positive spread). 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