Securities lending, once considered a mundane middle and back office operational chore, is quickly becoming the target of scrutiny from savvier plan sponsors who want a far better understanding of the financial benefits and pitfalls.

"The plan sponsor is responsible for doing its homework and understanding the risks and rewards it is receiving," when lending or borrowing securities, says Josh Galper, managing principal of Finadium Partners, a Concord, Mass.-based consultancy. "It's not the custodian bank or third party agent's responsibility to provide complete disclosure of every potential risk nor is it realistically feasible."

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