A payment that is received by a securities lender for a dividend distributed on a loaned security. By agreement, the borrower, in securities lending, remits to the lender any dividends, interest, or other distributions that are paid during the time that the securities are on loan. In essence, the lender is not entitled to receive any dividends from the ownership while a security is on loan. However, it is usual the lender and the borrower agree that the borrower must pay a manufactured dividend to the lender as a compensation for such a loss of income. Conventionally, securities lending arrangements provide that the borrower must pay to the lender a manufactured dividend in lieu of any dividends distributed on the loaned security.
October 11, 2024
