Fully Paid Lending

You could earn additional income on securities you hold

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What's our Fully Paid Lending program?

Our Fully Paid Lending (FPL) program allows you to potentially generate additional income in your portfolio by lending your shares. If you're holding in-demand securities, your securities may be selected to be loaned out. When shares are loaned out, you'll earn income, which will be paid to you monthly.

How does it work?

After you enroll, Vanguard Brokerage may borrow shares that you hold and lend them to counterparties who are seeking to borrow such shares.

You will receive income from Vanguard Brokerage on any borrowed security. Income accrues daily and is paid monthly.

When your loan is closed, all of your shares will be returned to you.

Benefits

You could earn additional income with securities you already hold.
Once you enroll, no additional action is needed by you to participate in this program.

You're safeguarded with cash collateral.
The borrower of your shares must provide collateral that's at least 102% of the daily market value of the securities.

You maintain economic ownership.
You can sell your shares or leave the program at any time. You'll also be able to view loan activity while you're enrolled.

Important considerations

  • Participation involves certain risks and there is no guarantee your shares will be borrowed or that you'll earn money while enrolled in the program.
  • The duration of any loan can vary.
  • When your shares are on loan, your voting rights will be temporarily transferred to the borrower.
  • Vanguard Marketing Corporation's ("VMC") shares on loan are not covered by SIPC. In the event VMC defaults on its loan obligations, you have the right to the collateral held on your behalf.
  • Borrowed shares can be used to facilitate a short sale, which could influence the price of the security.
  • If your security on loan pays a dividend, you'll receive a substitute payment that could have tax consequences different than dividend payments made on shares held in your account.
  • While your security is on loan, the lending rate will adjust frequently with the lending market, meaning the rate may not be fixed during the loan period.
  • This information isn't a recommendation to participate in Vanguard Brokerage's Fully Paid Lending program.
  • Participation requires eligibility, client-determined appropriateness, and enrollment.
  • Loans are collateralized, but there's a risk of loss if the event of bankruptcy.
  • Vanguard Brokerage maintains an economic interest in Fully Paid Lending program loans and earns revenue in connection with such loans.

Apply to enroll

If you meet our eligibility requirements and the program is appropriate for you, you can submit your enrollment. Enrollment is completed at the account level, so if you'd like to enroll more than one account, you'll need to complete an application for each account. Once you're enrolled, you can potentially earn additional income on shares that are borrowed.

Begin enrollment

FAQs

No, enrollment is at the account level. You can’t specify shares you do or don’t want to lend.

Put simply, it’s a matter of supply and demand. There’s no guarantee your shares will be borrowed.

The securities most likely to be loaned are those that the market deems "hard to borrow," which refers to those in scarce supply or in high demand for short selling.

Income is based on the lending rate, the number of shares loaned, and the duration of each loan of shares, any of which can vary based on supply and demand and market conditions.

You can sell shares at any time. If the shares you sell are on loan, the loan will be terminated.

We are offering this new product to our clients to provide another investment option. Please note, we're not acting as agent or fiduciary with respect to any loans.

You can unenroll at any time by calling and speaking to one of our representatives.

The principal risk to any securities lending program is counterparty borrower risk. Vanguard Brokerage is the borrower of all Fully Paid Lending (FPL) client loans. All loans are collateralized at 102% of market value of the loaned shares. The collateral is adjusted daily to keep pace with the ups and downs of the market. Clients with shares on loan through FPL will be able to collect against that collateral from the third-party trustee.

If Vanguard Brokerage were to default, you would have the right to withdraw the collateral from the custodian bank as described in the Vanguard Retail Customer Fully Paid Securities Lending Agreement. If you were to initiate a withdrawal request, the FPL trustee would distribute an amount equal to the current collateral set aside for the shares loaned through the program. Please discuss your specific tax situation with a qualified tax advisor.

Cash dividends paid on securities borrowed by Vanguard Brokerage pursuant to the Fully Paid Lending Program will be credited to your Vanguard Brokerage Account in the form of a "cash-in-lieu" payment if shares are borrowed over a dividend record date. Receipt of cash-in-lieu payments may have different taxable consequences than receipt of the actual dividend from the issuer.

In order to mitigate the impact of cash-in-lieu payments to taxable accounts, Vanguard Brokerage may return shares prior to a dividend record date.

To help offset the potential tax burden associated with the receipt of the cash-in-lieu payments in place of qualified dividends (as defined in the Jobs and Growth Tax Relief Reconciliation Act of 2003), Vanguard Brokerage will credit participating taxable accounts with an additional credit reimbursement equal to 8.97% of the substitute payment.

The credit adjustment percentage may be increased or decreased from time to time by Vanguard Brokerage. Vanguard Brokerage does not guarantee that this adjustment will be sufficient to eliminate the full additional tax burden associated with all the dividend distribution.

Vanguard Brokerage reserves the right to deny credit adjustments to any customer whom Vanguard Brokerage determines would have been otherwise ineligible to receive the tax benefit of a reduced dividend tax rate.

All investing is subject to risk, including the possible loss of the money you invest.