How To Stop Fidelity From Lending My Shares

Introduction

Welcome to this guide on how to prevent Fidelity from lending your shares. If you’re a Fidelity customer who is concerned about the practice of stock lending and want to ensure that your shares are not being borrowed, you’re in the right place. In this article, we will explore what stock lending is, why Fidelity engages in this practice, and most importantly, discuss the steps you can take to stop Fidelity from lending your shares.

Stock lending, also known as securities lending, is a common practice in the financial industry. It involves borrowing shares from investors who are willing to lend them to others, typically short sellers, in exchange for a fee. This process allows short sellers to sell borrowed shares in the hope that the stock price will go down, enabling them to buy back the shares at a lower price and pocket the difference.

While stock lending can have benefits and serve various purposes within the broader market, it is important for investors to understand the implications and risks associated with this practice. Fidelity, like many other brokerage firms, engages in stock lending to generate additional revenue and maximize returns for its clients. However, as a Fidelity customer, you have options to control whether your shares are available for lending.

The decision to participate in stock lending is ultimately left to the individual investor. Some investors may be comfortable with the practice, while others may have concerns about the potential risks involved. If you fall into the latter category and wish to prevent Fidelity from lending your shares, keep reading as we dive into the steps you can take to protect your investments.

In the following sections, we will explore three options you can pursue to stop Fidelity from lending your shares. These options include utilizing Fidelity’s opt-out feature on their website, contacting Fidelity directly, or transferring your shares to another brokerage that aligns more closely with your preferences. Let’s delve into each of these options in detail, so you can make an informed decision that best suits your investment strategy and risk tolerance.

What is stock lending?

Stock lending, also known as securities lending, is a practice in the financial industry where investors lend their shares to others, typically short sellers, in exchange for a fee. This process allows short sellers to borrow shares they do not own and sell them in the hope that the stock price will decline. If the price does go down, they can buy back the shares at a lower price and return them to the lender, keeping the difference as profit.

The concept of stock lending may seem confusing, but it serves a crucial role in the broader market. It provides liquidity and allows for efficient trading by ensuring that there are shares available for short sellers who want to bet against a stock’s performance. It also benefits the lenders by providing them with an additional source of income through the lending fees. These fees can vary depending on factors such as the stock’s demand, availability, and loan duration.

Stock lending is typically facilitated by brokerage firms like Fidelity. When you open a brokerage account, you give your consent for your shares to be available for lending unless you specify otherwise. Fidelity engages in stock lending as a means of generating revenue and maximizing returns for both the firm and its clients.

It’s important to note that stock lending is regulated and subject to various rules and regulations to protect investors’ interests. For example, lenders are compensated for any losses that occur if the borrower defaults or the stock price rises significantly during the lending period. Additionally, lenders retain all other ownership rights, such as voting rights, during the loan period.

While stock lending can have benefits, it also carries some risks. There is a possibility that the borrower may fail to return the shares, resulting in a loss for the lender if the stock price has increased in the interim. However, these risks are usually mitigated by collateral requirements and margin maintenance. Nevertheless, as an investor, it’s essential to understand the potential risks involved in stock lending and evaluate whether it aligns with your investment goals and risk tolerance.

In the next sections, we will explore ways to ensure that your shares are not available for lending through Fidelity. By taking control of this aspect, you can have the peace of mind knowing that your shares are not subject to stock lending and the associated risks. Whether you have specific concerns or simply prefer to have full control over your investments, read on to discover the steps you can take to prevent Fidelity from lending your shares.

Why does Fidelity lend shares?

Fidelity, like many other brokerage firms, engages in stock lending as a means of generating additional revenue and maximizing returns for its clients. While stock lending may seem counterintuitive at first, it plays a crucial role in the overall operations and profitability of the firm.

First and foremost, Fidelity earns fees from stock lending transactions. When shares are lent out, Fidelity charges borrowers a fee for the loan. This fee can vary depending on factors such as the demand for the stock, the availability of shares, and the duration of the loan. These fees contribute to Fidelity’s overall revenue, which helps offset costs and potentially lowers fees for its clients.

In addition to the direct financial benefit, stock lending serves as a way for Fidelity to enhance the efficiency and liquidity of the market. By making shares available for short sellers, who may have a negative outlook on a particular stock, Fidelity facilitates trading and provides necessary liquidity. This allows short sellers to express their views on a stock’s performance, which helps create a more balanced market and provides opportunities for other investors.

Furthermore, stock lending can help enhance the overall returns for Fidelity’s clients. The fees earned from stock lending are typically shared with the investors who have lent out their shares. This sharing of revenue can potentially increase the returns for those investors, providing an additional income stream on top of any potential capital gains or dividends from their investments.

It’s important to note that Fidelity has policies and procedures in place to mitigate the risks associated with stock lending. The firm carefully selects borrowers, conducts due diligence, and requires collateral from the borrowers to secure the loan. These measures are designed to protect the interests of Fidelity’s clients and ensure that the lending process operates within regulatory guidelines.

Despite these benefits, it is understandable that some investors may have concerns about stock lending and prefer to have full control over the availability of their shares. If you’re a Fidelity customer who wishes to prevent your shares from being lent out, the following sections will outline the steps you can take to ensure that your shares are not subject to stock lending. By being proactive and exercising your options, you can maintain control over your investments and tailor them to align with your preferences and risk tolerance.

Understanding the risks

Though stock lending can offer benefits for investors and brokerage firms like Fidelity, it is crucial to understand the potential risks associated with this practice. By being aware of these risks, you can make informed decisions about whether you want to participate in stock lending or take steps to prevent your shares from being borrowed.

One of the primary risks of stock lending is the possibility of default by the borrower. In the event that the borrower fails to return the shares, the lender, or in this case, you, may experience a loss. This risk is particularly pertinent if the stock price increases significantly during the lending period. However, it’s important to note that reputable brokerage firms like Fidelity have specific measures in place to mitigate the risk of borrower default.

Another risk to consider is the potential impact on the voting rights associated with your shares. When you lend out your shares, you temporarily transfer the voting rights to the borrower. This means that during the loan period, you may not have a say in important corporate decisions or shareholder votes. If voting rights are a priority for you, it is essential to take stock lending into account and decide whether it aligns with your goals.

Additionally, there is a possibility that the borrowed shares may be used to manipulate the market. While this is a rare occurrence, it is a risk to consider. Market manipulation can involve activities such as spreading false information or artificially inflating or deflating stock prices. However, stringent regulations and monitoring mechanisms are in place to prevent and penalize such activities.

Finally, while stock lending is typically collateralized, there is no guarantee that the value of the collateral will cover any potential losses. Financial markets can be volatile, and a sudden and significant decline in the value of the collateral could result in a loss for the lender.

It’s important to remember that the risks associated with stock lending can occur in varying degrees, and not all lenders may experience them. However, if these risks concern you and you prefer to have full control over the availability of your shares, it is advisable to take steps to prevent your shares from being borrowed.

In the next sections, we will discuss the options available to you as a Fidelity customer to stop Fidelity from lending your shares. By understanding these options and taking action, you can mitigate the risks associated with stock lending and have greater control over your investments. Let’s explore the steps you can take to protect your shares.

Steps to prevent Fidelity from lending your shares

As a Fidelity customer, you have several options available to prevent your shares from being lent out. Whether you have concerns about the risks associated with stock lending or simply prefer to retain full control over your investments, the following steps will guide you in protecting your shares:

1. Option 1: Opt-out through Fidelity’s website: Fidelity provides an opt-out feature on their website that allows you to prevent your shares from being available for lending. To utilize this option, log in to your Fidelity account, navigate to the settings or account preferences section, and look for the stock lending or securities lending option. From there, you can select the opt-out option, which will ensure that your shares are not lent out. Keep in mind that this option may vary depending on the specific layout and design of Fidelity’s website, so you may need to explore the menus or reach out to Fidelity’s customer support for guidance.

2. Option 2: Contact Fidelity directly: If you prefer a more personalized approach, you can contact Fidelity’s customer service team to request that your shares not be made available for lending. Reach out to Fidelity via phone, email, or their secure messaging system, and explain your request to opt-out of share lending. The customer service representative will assist you in ensuring that your shares are not included in the stock lending program. This option allows you to have direct communication with Fidelity and may provide additional clarity or peace of mind about the process.

3. Option 3: Transfer your shares to another brokerage: If you are unable to opt-out of share lending through Fidelity or if you are seeking a more comprehensive solution, you have the option of transferring your shares to another brokerage that aligns with your preferences. Conduct research on alternative brokerage firms and compare their policies on share lending. Look for a brokerage that either does not engage in stock lending or allows you to easily opt-out. Once you’ve identified a suitable brokerage, initiate a transfer of your shares from Fidelity to the new brokerage. This process may involve some paperwork and potentially incur transfer fees, so be sure to familiarize yourself with the requirements and associated costs.

By implementing one of these options, you can take control of whether your shares are available for lending. It’s important to note that once you have opted out or transferred your shares, be sure to regularly review your account settings or contact customer service to verify that your preferences are being followed. This way, you can have peace of mind knowing that your shares are not being lent out, and you can focus on managing your investments according to your own strategies and goals.

Option 1: Opt-out through Fidelity’s website

Fidelity provides a convenient option on their website that allows you to opt-out of stock lending and prevent your shares from being made available for borrowing. This straightforward process can be completed by following a few simple steps:

1. Log in to your Fidelity account: Start by logging in to your Fidelity brokerage account through their official website. Enter your username and password to access your account dashboard.

2. Navigate to the account settings or preferences: Once you’ve logged in, locate the account settings or preferences section. This may vary depending on the specific layout of Fidelity’s website, but it is typically accessible through a dropdown menu or a dedicated settings tab.

3. Find the stock lending or securities lending option: Within the account settings or preferences section, look for the stock lending or securities lending option. This is where you can manage your preferences related to the availability of your shares for lending.

4. Select the opt-out option: Once you’ve found the stock lending or securities lending option, choose the opt-out or do-not-lend option. By selecting this option, you are indicating your preference that your shares should not be made available for borrowing.

5. Save your changes: After selecting the opt-out option, make sure to save your changes. This ensures that your preferences are updated in Fidelity’s system and that your shares are not included in the stock lending program.

It’s important to note that the exact steps and terminology may vary on Fidelity’s website, as they might update their user interface or make changes to their website structure. If you encounter any difficulties or are unable to locate the opt-out option, consider reaching out to Fidelity’s customer support for further assistance. They will be able to guide you through the process and address any questions or concerns you may have.

By opting out of stock lending through Fidelity’s website, you can have peace of mind knowing that your shares will not be made available for borrowing. This option allows for easy and convenient control over the lending of your shares and enables you to manage your investments according to your own preferences and risk tolerance.

Option 2: Contact Fidelity directly

If you prefer a more personalized approach or encounter any difficulties while trying to opt-out of stock lending through Fidelity’s website, you have the option to contact Fidelity directly. By reaching out to their customer service team, you can request that your shares not be made available for lending. To contact Fidelity, you can follow these steps:

1. Gather your account information: Before contacting Fidelity, ensure that you have your account information readily available. This may include your account number, name, and any other details that can help Fidelity identify your account during the conversation.

2. Choose your preferred communication method: Fidelity provides various communication channels for customer support, including phone, email, and secure messaging. Decide which method of communication is most convenient for you and aligns with your preferred level of interaction.

3. Initiate contact: Reach out to Fidelity’s customer service using your chosen communication method. If you are calling by phone, ensure that you have a quiet and comfortable environment to hold the conversation.

4. Explain your request: Clearly communicate to the customer service representative that you wish to opt-out of stock lending and prevent your shares from being lent out. Provide any necessary details or account information requested to facilitate the process.

5. Confirm the outcome: Once you have made the request, confirm with the customer service representative that your preference to opt-out of stock lending has been recorded in their system. It’s essential to have this confirmation to ensure that your shares are not made available for borrowing.

By contacting Fidelity directly, you can have a personalized conversation with their customer service team and address any specific questions or concerns you may have. They can provide you with guidance, assist you in navigating the opt-out process, and ensure that your preferences are accurately reflected in Fidelity’s system. This method allows for a more interactive approach and provides you with the opportunity to seek clarification on any related topics.

Remember to document the details of your conversation, including the date, time, name of the representative you spoke with, and any reference numbers provided. Having this information on hand can be helpful for future reference or in case of any discrepancies or follow-up inquiries.

By contacting Fidelity directly and clearly expressing your desire to opt-out of share lending, you can take control of the lending process and ensure that your shares are not utilized for stock lending purposes.

Option 3: Transfer your shares to another brokerage

If you are unable to opt-out of stock lending through Fidelity or if you are seeking a more comprehensive solution, you have the option of transferring your shares to another brokerage that aligns with your preferences. This option allows you to have greater control over the lending of your shares and choose a brokerage that either does not engage in stock lending or allows you to easily opt-out. Here’s how you can transfer your shares:

1. Research alternative brokerages: Start by conducting research on alternative brokerage firms that align with your preferences regarding stock lending. Look for firms that have clear policies on stock lending or have the option to easily opt-out. Consider factors such as reputation, fees, trading platforms, and customer service when evaluating potential brokerage options.

2. Open an account with the new brokerage: Once you have chosen a suitable brokerage, follow their account opening process. This typically involves providing personal information, such as identification documents and proof of address. It may also require funding your new account with sufficient funds to cover the transfer of your shares.

3. Initiate the share transfer: Contact your new brokerage and inform them that you wish to transfer your shares from Fidelity. They will guide you through the transfer process, which may involve completing transfer forms, providing information about the shares you wish to transfer, and potentially paying transfer fees imposed by Fidelity or the new brokerage. The new brokerage will communicate with Fidelity to initiate the transfer.

4. Monitor the transfer process: Once the transfer process has been initiated, stay in touch with both Fidelity and the new brokerage to monitor the progress of the transfer. You can inquire about estimated timelines and any additional steps required from your end to complete the transfer successfully.

5. Review and confirm the transferred shares: Once the transfer is complete, review your new brokerage account to ensure that all the shares you intended to transfer are accurately reflected in the account. If you notice any discrepancies or missing shares, promptly contact your new brokerage for assistance in resolving the issue.

Transferring your shares to another brokerage that aligns with your preferences regarding stock lending provides you with a comprehensive solution. It allows you to have greater control over the availability of your shares for lending and tailor your investments to match your desired level of involvement in stock lending activities.

Keep in mind that the transfer process may involve some paperwork and potentially incur transfer fees. Familiarize yourself with the requirements and associated costs before initiating the transfer. Additionally, it is advisable to consult with your financial advisor or tax professional to ensure that the transfer aligns with your overall investment strategy and any regulatory or tax considerations.

By transferring your shares to another brokerage, you can exercise full control over the lending of your shares and choose a firm that meets your specific preferences and risk tolerance.

Frequently Asked Questions

Here are some commonly asked questions about preventing Fidelity from lending your shares:

1. Is stock lending legal?
   Yes, stock lending is a legal practice regulated by financial authorities. It is a common activity in the financial industry aimed at facilitating efficient trading and generating additional revenue for brokerage firms.

2. What are the benefits of participating in stock lending?
   Stock lending can generate additional income for investors through lending fees. It also enhances liquidity in the market and allows short sellers to borrow shares for their trading strategies, promoting a balanced market.

3. What are the risks associated with stock lending?
   The primary risks of stock lending include borrower defaults, potential loss of voting rights, market manipulation, and the possibility that the value of the collateral may not cover potential losses.

4. Can I opt-out of stock lending with Fidelity?
   Yes, Fidelity provides an opt-out option through their website. By visiting your account settings or preferences, you can select the opt-out or do-not-lend option to prevent your shares from being made available for borrowing.

5. What happens if I opt-out of stock lending?
   If you opt-out of stock lending, your shares will not be made available for borrowing. This reduces the risk of borrower defaults and ensures that your shares remain under your ownership without being utilized for stock lending purposes.

6. Can I contact Fidelity to prevent them from lending my shares?
   Yes, you can directly contact Fidelity’s customer service and request that your shares not be made available for lending. They can assist you in ensuring that your preferences are recorded and followed appropriately.

7. What if I want a more comprehensive solution?
   If you are seeking a more comprehensive solution, you have the option to transfer your shares to another brokerage that aligns with your preferences on stock lending. By doing so, you can have greater control over the availability of your shares for lending.

8. Does transferring my shares incur any fees?
   Transferring shares to another brokerage may involve transfer fees imposed by both Fidelity and the new brokerage. It’s important to familiarize yourself with these fees and any other costs associated with the transfer process.

If you have any additional questions or concerns about preventing Fidelity from lending your shares, it is recommended to reach out to Fidelity directly or consult with a financial advisor. They can provide personalized guidance based on your specific circumstances and investment goals.

Conclusion

In this guide, we have explored the options available to prevent Fidelity from lending your shares. Stock lending is a common practice in the financial industry, and Fidelity, like other brokerage firms, engages in this activity to generate additional revenue and enhance market liquidity. However, as an investor, you have the right to decide whether your shares should be available for lending.

To prevent Fidelity from lending your shares, you can opt-out through Fidelity’s website or contact their customer service directly to communicate your preference. These options allow you to maintain control over the lending of your shares and align your investments with your risk tolerance and objectives.

If you prefer a more comprehensive solution, transferring your shares to another brokerage that better matches your stock lending preferences is another alternative. This provides you with greater control and the ability to choose a firm that aligns with your specific needs.

It’s important to understand the potential risks associated with stock lending, including borrower defaults, potential loss of voting rights, and market manipulation. By being aware of these risks, you can make informed decisions about whether to participate in stock lending or take steps to mitigate these risks.

We hope this guide has provided you with valuable insights and practical steps to prevent Fidelity from lending your shares. It’s crucial to regularly review and monitor your account settings to ensure that your preferences are being followed. If you have any specific concerns or inquiries, reach out to Fidelity or consult with a financial advisor for personalized guidance based on your individual circumstances.

Remember, maintaining control over the lending of your shares is an important aspect of managing your investments and aligning them with your preferences and goals. By taking proactive steps, you can have peace of mind knowing that your investments are managed according to your own strategies and risk appetite.