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Money Management Executive

SEC Continues to Question Securities Lending Practices

November 12, 2004, 1:00 a.m. EST 1 Min Read

The Security and Exchange Commission has widened its net regarding mutual fund stock lending practices, according to a report from Reuters. State Street Corp. and Dreyfus, a mutual fund unit of Mellon Financial Corp., are the newest targets of the SEC investigation.

The probe is based upon funds’ practice of loaning stocks to hedge funds and wealthy investors. During the loan period, the funds hold onto collateral, off of which they receive income. However, it is not clear whether investors benefit by receiving credit in the mutual funds themselves.

Dreyfus is cooperating with the review and remains confident that its practices are sound, a spokesperson told Reuters.

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