How to enroll clients in securities lending fully paid (SLFP)

How to enroll clients in securities lending fully paid (SLFP)

SLFP is a program allowing clients to lend fully paid Tooltip securities for monthly loan income. When a client enrolls in the program, their eligible shares move into a new, segregated SLFP brokerage account. Schwab lends the shares to other clients or financial institutions to facilitate trading strategies or to fulfill settlement obligations.

SLFP targets stock positions of hard-to-borrow securities with the highest demand in the securities lending marketplace. Client participation is by invitation only.

Clients should be aware of important considerations before participating in the SLFP program.

  • A taxable or tax-indifferent account holding fully paid shares of high demand securities.
  • An open invitation Tooltip  to the SLFP program.
  • Information for account holder, power of attorney, trustee, or authorized agent, including name, employment status, employer name, occupation title, business address, affiliation status, marital status, and number of dependents.
  • Information for trust account, including annual income, net worth, liquid net worth, and trading experience (FINRA has instituted an "appropriateness" rule for participation in SLFP however, Schwab Advisor Services™ accounts are exempt from providing this information because they are professionally managed accounts.).
  1. A Schwab relationship manager or Securities Lending representative (if given consent) provides notification of all SLFP opportunities.
  2. Once notified, you can present the opportunity to the client.
  3. If interested, help them enroll in SLFP online through Schwab Alliance or email the form.
  • Once received, the Securities Lending team processes the request and opens a supplemental brokerage account on behalf of the client.
  • Within one to two business days, clients receive an email confirmation and see the stock in the lending account.
  • The account holder should consult with their tax advisor if they have any questions about tax implications.
  • If the client is not eligible for SLFP offers, they receive a message prompting them to call Securities Lending Team at 877-793-8872 for assistance.
  • Contact the Securities Lending team at 877-793-8872 with questions.

To select a form, go to Forms library on Schwab Advisor Center. 

Resource: Cash Collateral FAQ
Resource: Schwab's Securities Lending Fully Paid Program brochure

What are the advantages of participating in the SLFP program?
A client enrolled in the SLFP program receives a monthly loan income. The program offers the potential to increase the effective yield on the client's assets and provides at least 100% collateral on all loaned shares.

The program is available at no cost, and clients have the freedom to add eligible securities, sell the securities, or request the return of loaned shares at any time. 

Does Schwab ever lend securities to facilitate short sales?
Yes, the principal reason for borrowing securities is to facilitate short sales; however, Schwab also lends securities to facilitate other trading strategies or to fulfill settlement obligations. Not all securities and account types are eligible for SLFP. Participation in SLFP is based on enrollment. Share price and interest rates may fluctuate based on market conditions, which will impact potential earnings. Interest rates used to calculate earnings are subject to change without prior notice.

How long does a loan last?
The terms of these loans vary; some may last for many months, while others may last less than a month. Typically, the shares remain on loan as long as there is demand for the security in the market.

How are clients compensated?
Schwab pays an agreed-upon interest rate stated in the confirmation for the loan. The loan income computes daily based on the market value of the loaned securities and a 360-day year. Schwab pays the client by the 15th of the month following the month of earned loan income.

Example—Estimated loan income per month for lending 15,000 shares of ABC at 2% annual interest (assumes $20 per share):

15,000 x $20.00 x 2.0% x (30/360) = $500 per month*

*This income calculation example is for illustrative purposes only and is no indication of future results.

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