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.
Neither Betterment nor Betterment Securities guarantees that earnings from lent shares will offset tax impact.
Voting rights
You temporarily lose voting rights for any shares on loan. Voting rights transfer to the borrower for the duration of the loan.
SIPC coverage
Loaned shares are not SIPC-protected. However, borrowers are required to post cash collateral equal to at least 100% of the loaned shares' value to secure the loan and reduce risk.
