SEC Division of IM Guidance: Securities Lending by U.S. Open-End and Closed-End Investment Companies
The attached guidance document has been prepared by the staff of the SEC Division of Investment Management, and includes a list of no-action letters which funds engaging in securities lending can rely upon. The following areas are addressed:
- Approval of fees paid;
- Benefits must be commensurate with the risks;
- Board's fiduciary duty to invest the fund's assets in accordance with fund's investment goals;
- Compensation to the lending fund;
- Delegation of authority to negotiate loans;
- Directors' fiduciary duty to act in the best interests of fund shareholders;
- Investment segregation;
- Loan collateralization;
- Loan termination;
- Obligation to return collateral may create a senior security, and limitation on amount that may be lent;
- Proxy voting;
- Receipt of dividends, interest, or other distributions on lent securities, and any increase in the market value on the lent securities;
- Receipt of reasonable interest on loans;
- Securities lending and a fund's fundamental policies; and
- Time within which borrowers must return securities upon loan termination.
Click here to view notice in full (links externally to CFTC website).