Securities lending FAQs

Securities lending lets eligible clients earn extra income by temporarily loaning your stocks and ETFs to other investors—without selling any of your investments. If there's demand, Betterment Securities 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 Securities handles it ...

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.

To participate, you'll need a completed financial profile and must agree to the program terms at opt-in. Eligible investments include fully paid whole shares of U.S.-listed stocks and ETFs. Fractional shares and margin-held positions are not eligible. Eligible accounts include taxable accounts (individual and joint) and tax-advantaged accounts. Trusts and business accounts are not eligible. Participation is also subject to Betterment Securities' discretion—certain account types or balances may ...

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. Once you're opted in, ...

Betterment Securities shares a set percentage of net lending income with you. The exact rate may change over time due to market demand and other factors, but will always be at least as much as disclosed in Betterment Securities’ program disclosures and income schedule. You can find the current rate in those disclosures. You are not guaranteed to have your shares lent out or make money.

With securities lending, 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 fluctuate from month ...

Dividends While your shares are on loan, you'll receive a cash substitute payment instead of the actual dividend. These payments are reported as ordinary income (Box 8 on your 1099-MISC) and may be taxed at a higher rate than qualified dividends depending on your tax bracket and account type. While Betterment's system is designed to loan your shares when it estimates your earnings will exceed the tax impact, neither Betterment nor Betterment Securities guarantees that earnings from lent shares ...

Opting in You'll be invited to the FPSL program via your Betterment dashboard once you're eligible. Opting in requires you to review and agree to the program agreements and disclosures. Please note that clients are only able to opt in at the "user" level and not on an account-by-account basis. Opting out You can exit the program at any time by adjusting your preferences in your account Settings.

Securities lending is another way your money can work harder for you. It can generate additional income from investments you already hold—without changing your strategy or requiring you to do anything differently. As with any investment strategy, securities lending does involve risk and income is not guaranteed, but it’s designed to be carefully managed as part of a diversified, long-term portfolio. See full disclosure for more information.

Counterparties—like banks, hedge funds, and other financial institutions—borrow shares primarily to support trading and investment strategies such as short selling, hedging, or market-making. They may also borrow securities to meet settlement obligations, enhance liquidity, or facilitate arbitrage strategies. In all cases, borrowers pay a fee for the temporary use of the shares. Apex is the principal borrower of your shares and may then lend those shares to other institutional counterparties.

Borrowers post cash collateral to secure the loaned shares and protect against default risk. This collateral is marked to market daily—meaning it's recalculated each market day to reflect current share prices. If the market value of your loaned shares rises, the borrower must post additional collateral; if it falls, excess collateral is returned. This daily adjustment keeps the collateral in step with the value of your shares at the end of each market day.