At the Securities and Exchange Commission's roundtable last week on how to regulate the multi-trillion-dollar securities lending industry to avoid a repeat of the billions of dollars lost in the credit crisis, the focus was on conservative investment of cash collateral and a clearinghouse to create transparency, reduce spreads and keep stock pricing efficient.

Clearly, risks in the securities lending marketplace are high. The California Public Employees' Retirement System lost $634 million in securities lending in the past year, and Wilshire Consulting estimates that figure could reach $1 billion. State Street just revealed in a filing that the SEC is investigating its cash collateral pools.

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