What types of collateral are posted?

Borrowers post collateral to secure the borrowed shares and protect the lender from default risk. In Betterment Securities’ program, this collateral is typically cash. The value of this collateral is marked-to-market daily — meaning it’s adjusted each day to match current market prices. If the market value of the loaned shares rises, the borrower must post additional collateral; if it falls, excess collateral is returned. This daily adjustment process functions like a recalculated security ...

Why are the counterparties borrowing the shares?

Counterparties borrow shares primarily to support trading and investment strategies such as short selling, hedging, or market-making. For example, a trader who sells a stock short must first borrow the shares to deliver to the buyer. Institutional borrowers, like banks or hedge funds, may also borrow securities to meet settlement obligations, enhance liquidity, or facilitate arbitrage strategies. In all cases, borrowers pay a fee to the lender for the right to use the shares temporarily. Apex ...

Securities lending is generally low-risk, but there are a few things to be aware of: Counterparty risk If a borrower defaults, Betterment Securities’ clearing firm Apex must return your shares using the pledged collateral. In that rare event, you have rights to access that collateral. It's held in a secure custody account and administered by a trustee. More detail is available in Betterment Securities disclosures and Apex's terms. Variable income Lending income depends on market demand and may ...

What happens to my dividends, voting rights, and SIPC coverage?

Dividends: While your shares are on loan, you’ll receive a cash substitute payment, i.e. a cash payment in lieu of the actual dividend. These are taxed as ordinary income (Box 3 on your 1099-MISC), which, depending on your marginal tax rate, and the account your shares are coming from (taxable or tax-advantaged), may be at a higher rate than dividends. Betterment Securities’ system is designed to lend securities when Betterment estimates that your earnings will exceed incremental tax costs, ...

Can I still sell or trade my shares while they're on loan?

Yes. You maintain full ownership of your investments and can sell or recall loaned shares at any time. Selling your shares automatically ends the loan, and the shares return to your account.

How is the income shared?

Betterment Securities will share a set percentage of net lending income with customers. The exact share and rate may change over time due to market demand and other factors, as reflected in the income schedule, but will always be at least as much as disclosed in Betterment Securities’ disclosures.

How can I enroll or opt out?

Enroll: You’ll be invited to the FPSL program via your Betterment dashboard once you’re eligible. Enrollment will require you to review and agree to the program agreements and disclosures. Opt out: You can exit the program anytime—just adjust your preferences in your account settings. You’ll be opted in to securities lending at the user level, not the account level, which means that once enabled, all eligible shares in the accounts you own will automatically be available for lending based on ...

What can I lend, and who is eligible?

Eligible investments include only fully paid whole shares of U.S.-listed stocks and ETFs. Fractional shares and margin-held positions are not eligible. Taxable (individual and joint) accounts, and tax-advantaged accounts are eligible for participation, while trusts and business accounts are not. Participation in the program is subject to Betterment Securities’ discretion, and certain account types or balances may be excluded, with additional details to be shared upon the program’s launch.

Why is Betterment Securities offering FPSL?

Securities lending is another way your money works for you — it can generate additional income from investments you already hold, helping you make more of your existing portfolio without changing your strategy.

What is Betterment's securities lending?

Securities lending lets you earn extra income by temporarily loaning your stocks and ETFs to other investors—without selling any of your investments. If there's demand, Betterment lends your shares on your behalf and passes the income on to you every month. You stay fully invested and can sell your shares at any time. Think of it like becoming the bank: your assets are still yours, they're just working a little harder in the background. Betterment handles everything automatically through our ...

How does the program work?

To participate in the FPSL program, you must have a completed financial profile and agree to the terms of the program at opt-in. Once enrolled, Betterment Securities’ clearing partner, Apex, evaluates demand in the lending market. If there is sufficient demand, your eligible shares may be loaned out to Apex, which then lends to other institutional borrowers. Borrowers pay a market-driven lending fee, and Betterment Securities shares a portion of this income with you. Clients access the FPSL ...

Securities lending FAQs

Basics

Borrowers post collateral to secure the borrowed shares and protect the lender from default risk. In Betterment Securities’ program, this collateral is typically cash. The value of this collateral is marked-to-market daily — meaning it’s adjusted each day to match current market prices. If the market value of the loaned shares rises, the borrower must post additional collateral; if it falls, excess collateral is returned. This daily adjustment process functions like a recalculated security ...
Read More
Counterparties borrow shares primarily to support trading and investment strategies such as short selling, hedging, or market-making. For example, a trader who sells a stock short must first borrow the shares to deliver to the buyer. Institutional borrowers, like banks or hedge funds, may also borrow securities to meet settlement obligations, enhance liquidity, or facilitate arbitrage strategies. In all cases, borrowers pay a fee to the lender for the right to use the shares temporarily. Apex ...
Read More
Securities lending is generally low-risk, but there are a few things to be aware of: Counterparty risk If a borrower defaults, Betterment Securities’ clearing firm Apex must return your shares using the pledged collateral. In that rare event, you have rights to access that collateral. It's held in a secure custody account and administered by a trustee. More detail is available in Betterment Securities disclosures and Apex's terms. Variable income Lending income depends on market demand and may ...
Read More
Dividends: While your shares are on loan, you’ll receive a cash substitute payment, i.e. a cash payment in lieu of the actual dividend. These are taxed as ordinary income (Box 3 on your 1099-MISC), which, depending on your marginal tax rate, and the account your shares are coming from (taxable or tax-advantaged), may be at a higher rate than dividends. Betterment Securities’ system is designed to lend securities when Betterment estimates that your earnings will exceed incremental tax costs, ...
Read More
Betterment Securities will share a set percentage of net lending income with customers. The exact share and rate may change over time due to market demand and other factors, as reflected in the income schedule, but will always be at least as much as disclosed in Betterment Securities’ disclosures.
Read More
Enroll: You’ll be invited to the FPSL program via your Betterment dashboard once you’re eligible. Enrollment will require you to review and agree to the program agreements and disclosures. Opt out: You can exit the program anytime—just adjust your preferences in your account settings. You’ll be opted in to securities lending at the user level, not the account level, which means that once enabled, all eligible shares in the accounts you own will automatically be available for lending based on ...
Read More
Eligible investments include only fully paid whole shares of U.S.-listed stocks and ETFs. Fractional shares and margin-held positions are not eligible. Taxable (individual and joint) accounts, and tax-advantaged accounts are eligible for participation, while trusts and business accounts are not. Participation in the program is subject to Betterment Securities’ discretion, and certain account types or balances may be excluded, with additional details to be shared upon the program’s launch.
Read More
Securities lending lets you earn extra income by temporarily loaning your stocks and ETFs to other investors—without selling any of your investments. If there's demand, Betterment lends your shares on your behalf and passes the income on to you every month. You stay fully invested and can sell your shares at any time. Think of it like becoming the bank: your assets are still yours, they're just working a little harder in the background. Betterment handles everything automatically through our ...
Read More
To participate in the FPSL program, you must have a completed financial profile and agree to the terms of the program at opt-in. Once enrolled, Betterment Securities’ clearing partner, Apex, evaluates demand in the lending market. If there is sufficient demand, your eligible shares may be loaned out to Apex, which then lends to other institutional borrowers. Borrowers pay a market-driven lending fee, and Betterment Securities shares a portion of this income with you. Clients access the FPSL ...
Read More