Protection of Your Investment
How safe are my assets?
The "Fully Paid" nature of the FPSL program provides additional protection for the investor. It is a program with built-in risk mitigation, but it is fundamental to understand the protection applied to your capital.
Security via Cash Collateral (SEC Rule 15c3-3)
While your shares are on loan, our custodian, DriveWealth, is obligated under SEC Rule 15c3-3 (Customer Protection Rule) to maintain collateral (guarantee) of more than 100% of the market value of your position.
Form of Collateral: These reserve funds are typically in cash and Treasury bonds.
Reimbursement Guarantee: If for any reason the borrower does not return your shares, DriveWealth will buy your position at the market price using this collateral. Your assets are guaranteed at all times.
What happens if the borrower defaults?
If the borrower defaults on their obligation, DriveWealth is legally responsible for reimbursing the value of your assets. The 100% guarantee in collateral is specifically designed for this scenario, ensuring your position remains intact.
Rights You Lose
It is fundamental to understand that by lending your shares, you temporarily lose certain property rights:
Lost Right | Implication | Mitigation |
SIPC Protection | Technically, you lose the coverage of the Securities Investor Protection Corporation (SIPC) while the stock is on loan. | The protection of the 100% cash guarantee, under SEC Rule 15c3-3, provides equivalent or superior protection to the $500,000 USD SIPC limit. |
Voting Rights | You lose the right to vote in shareholder meetings or corporate actions related to the shares on loan. | You recover your voting right upon the end of the loan. |
Operation and Control of Your Portfolio
Is my ability to trade (buy/sell) interrupted?
Absolutely not. Your ability to trade (buy or sell) and manage your investment portfolio is not interrupted at any time, even if your shares are on loan.
If I sell a lent share, do I receive interest for the time it was on loan?
Yes. The loan ends at the time of sale, but you will receive the interest accumulated for the exact time your shares were actively on loan.
When do I receive the interest from FPSL?
Interest payments from stock lending are processed after the second week of the month by DriveWealth; dates may vary.
How quickly can I exit the program or recover my shares?
You maintain total control:
Immediate Sale: You can sell the shares that are on loan at any time. DriveWealth is responsible for recalling the share from the borrower or supplying other shares to complete the sale.
Immediate Opt-Out: As mentioned in Article 1, you can deactivate the program from your app, just with a tap from the account settings, ending your participation immediately.
Eligibility of Assets
What securities are eligible for lending?
Not all securities in your portfolio are eligible. Eligibility for the FPSL is determined by our custodian, DriveWealth, and depends on these main criteria:
Market Demand: The loan only occurs if there is active market demand for that security by financial institutions.
Non-eligible Assets by Condition: Shares that are not fully paid or that are not in the control and possession of the Firm.
Regulatory Restrictions: Shares can only be lent if they are fully settled and are not subject to legal or regulatory restrictions that prevent their transfer.
Reminder: Interest only generates when an eligible share is actively on loan.
Securities offered by Northbound Securities, LLC Member FINRA/SIPC