Fully Paid Lending program

You'll receive a confirmation each time shares are loaned from your account. All loans that occur on the same day will be included on the same confirmation. If you've signed up for e-delivery, you may receive notifications more regularly.

When logged in to your account, you'll see an "On loan" indicator next to the security symbol when shares are on loan. Hovering your cursor over it will tell you how many shares are currently on loan.

By clicking on the symbol of a security in your account, you'll be able to see the following information over the last 30 days:

• How many shares are on loan.
• The annualized rate you're receiving.
• Estimated daily and monthly accrued income.
• Realized year-to-date income.

The following client example demonstrates the use case for fully paid lending and how value can be unlocked by enrolling. This example is for illustration purposes only. The number of borrowed shares and lending rates will vary.​

Example client scenario:​
Mr. Smith has a portfolio of stock and ETF shares that he inherited after his father's passing. He decides to enroll that account into the program to see if he could generate additional income without selling those positions.

• In the 1st month, his shares of XYZ corporation go out on loan for a nominal annualized interest rate of 0.25%, making him $20.70.
• In the 2nd month, XYZ announces a spin-off. During that time, the stock increases in demand in the lending market. The annualized rate on his loan becomes 5% and he makes $479.16 that month.
• In the 3rd month, after the corporate event concludes, there's no longer demand for the stock and shares are returned.​

The principal risk to any securities lending program is counterparty borrower risk. Vanguard Brokerage is the borrower of all Fully Paid Lending (FPL) program 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.

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. Doing so could trigger a taxable event. 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 tax 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 provide participating taxable accounts with an additional credit reimbursement. This is equal to 26.98% of the substitute payment amount. This will allow for a credit to eligible accounts at the highest federal tax bracket of 37%.

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 dividend distributions.

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.

Let's look at an example. Consider a client in the 37% federal tax bracket who receives a $10,000 substitute payment instead of a qualified dividend. While a qualified dividend would be taxed at 20%, resulting in a $2,000 tax liability, the substitute payment is taxed at 37%, or $3,700. To offset this $1,700 difference, the client receives a taxable reimbursement credit of $2,698. After accounting for the 37% tax on that credit (approximately $998), the client nets the same $1,700, effectively bringing them to tax parity with the original qualified dividend scenario. With a larger gross-up payment, clients in lower tax brackets will not only have their tax liability offset but also receive additional income.

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