SEC Sets Sights on Securities Lending

The Securities and Exchange Commission is concerned about the additional risk investment firms take on when they put cash collateral earned from securities lending into other uses, along with the lack of true transparency in the market. Thus, the SEC will conduct a “wholesale review” of the entire securities lending marketplace in a roundtable on Tuesday.

“Securities lending traditionally has been viewed by investors such as pension plans, endowments, foundations and mutual funds as a way to put otherwise dormant assets to use to earn a few extra basis points of return on a relatively risk-free basis,” SEC Chairman Mary Schapiro recently said.