As a Fidelity investor, I recently found out that my shares may be lent out to other investors in exchange for a fee.

While this may seem like a good way to earn some extra income, it also comes with risks and potential downsides.

For one, if my lent shares are used for short selling and the price of the stock drops, I could potentially lose money.

Additionally, I may not have control over which shares are being lent out, which could include shares that I want to hold onto long-term.

How do I stop fidelity lending my shares?

It’s important to note that this may result in lower returns on your investments, as you’ll be missing out on the lending fees that would have been earned.

Another option is to selectively opt out of lending certain shares.

For example, if you want to keep your GameStop (GME) shares from being lent out, you can create a separate cash-only account and transfer your GME shares to that account.

Then, in your primary account, you can opt into the lending program for your other shares while excluding GME.

Keep in mind that this may require some extra effort and management on your part, but it can be a good compromise for those who want to earn lending fees while still maintaining control over their GME shares.

The Risks of Share Lending

As a Fidelity investor, you may have heard about the Fully Paid Lending Program, which allows Fidelity to lend out your fully paid securities to other investors for a fee.

While the program can provide benefits, it also comes with some risks that you should be aware of.

One of the main risks of share lending is counterparty risk. When you lend your shares, you are essentially entering into a contract with the borrower.

If the borrower defaults on the loan, you could potentially lose your shares, as well as any potential gains you would have made had you held onto the shares.

While Fidelity takes steps to mitigate counterparty risk, it is still a risk that you should consider before participating in the program.

Another risk to consider is market risk. When you lend your shares, you are essentially giving up control of them for a period of time. During that time, the market could experience significant fluctuations, which could impact the value of your shares.

While you will still receive any dividends or interest payments during the loan period, you will not be able to sell the shares until they are returned to you.

Finally, it is important to consider the impact that share lending could have on your taxes. When you lend your shares, you are technically selling them to the borrower.

This could trigger a taxable event, which could impact your tax liability. While Fidelity provides tax reporting for shares that are lent out, it is important to consult with a tax professional to understand the potential tax implications of participating in the program.

Overall, while the Fully Paid Lending Program can provide benefits, it is important to consider the risks before participating.

If you decide that the risks outweigh the benefits, you may be wondering how to turn off share lending with Fidelity.

The process for doing so is relatively simple, and can be done through your Fidelity account settings. Simply navigate to the Securities Lending section of your account, and follow the prompts to turn off share lending.

How Do I Stop Fidelity Lending My Shares?

As a Fidelity account holder, you have the option to lend your shares to other investors. However, if you want to stop Fidelity from lending your shares, you can do so by following these steps:

Step 1: Log In to Your Fidelity Account

The first step is to log in to your Fidelity account using your username and password.

Step 2: Navigate to the Securities Lending Page

Once you are logged in, navigate to the Securities Lending page. You can find this page by clicking on the Accounts & Trade tab and selecting the Securities Lending option from the drop-down menu.

Step 3: Review Your Lending Preferences

On the Securities Lending page, you will see a list of your lending preferences. Review these preferences to ensure that your shares are not being lent out.

Step 4: Change Your Lending Preferences

If you find that your shares are being lent out, you can change your lending preferences by clicking on the Edit button. From there, you can uncheck the box next to the securities that you do not want to lend out.

Step 5: Confirm Your Changes

After you have made your changes, be sure to click on the Save button to confirm your preferences. Your changes will take effect immediately, and Fidelity will no longer lend your shares.

By following these simple steps, you can stop Fidelity from lending your shares and take control of your investments.

Brokers often lend customers’ shares to short-sellers. When you first open an account, there’s a chance that you automatically opt-in for such a program. If you have a Fidelity account, then you have a right to know if they have such a program in place by default. Well, do they?

Can Fidelity Lend My Shares?

Yes, Fidelity can and will lend your shares, but only if you have a margin account or you have enabled Level 3 and 4 permissions for options trading. You can ask them to remove you from the shared lending program or simply move from a margin to a cash account. The change will take effect in 3 to 5 business days, but it might downgrade your options trading permissions.

Why Does Fidelity Lend My Shares and How Does This Affect Me?

Simply put, Fidelity lends your shares because they make money.

Fidelity (like all brokers) will lend your purchased stocks to short sellers and charge them an interest rate as long as their short position is open.

First of all, don’t worry about the short seller defaulting if you have a Fidelity account. SIPC insurance guarantees that if such a thing happens, you won’t lose your shares.

The main problem with this practice is that short-selling a stock tends to bring its price down.

When short sellers borrow shares of a stock, they immediately sell them in the open market, thus increasing the supply of that stock. Therefore, increases in supply naturally force the price of a stock down.

So, by letting Fidelity or any other broker for that matter lend a stock of yours to short sellers, you indirectly bring the price of your stock down. You basically act against your own interests, in fact…

Should you Ask Fidelity to Stop Lending your Shares?

As I already explained above, you act against your own interests when you allow Fidelity to lend your shares. But here’s the deal. It won’t make a huge difference if you opt out of the program. That is, you won’t stop contributing in pushing the price down much.

If you are an active trader planning on holding the stocks you buy for a short period, it may affect you more. But still, you will need to have a huge position to feel the difference.

So, if you opt out of this program, it will only be a matter of principle.

That’s important, of course. If more and more people get informed that brokers lend their customers’ shares, this could have a more significant impact.

What I’m getting at is this. If you really need to keep having a margin account or advanced options trading permissions, then I don’t want you to think that this matters much when it comes to your individual situation.

Rather, it’s a more broad issue that probably won’t concern you more than not having a margin account.

So it’s up to you whether you should stop Fidelity from lending your shares or not…

Do I Benefit when Fidelity Lends My Shares?

Another problem with Fidelity lending your shares is that unless you have more than $250,000 funded in your account and have opted-in for their Fully Paid Lending Program, you won’t be able to benefit from it.

At the same time, this makes sense because you won’t lose your shares, so Fidelity takes all the risk.

So, to answer your question, you can’t benefit by allowing Fidelity to lend your shares. Their Fully Paid Lending Program, though, does bring some benefits.

Let’s now outline some of these benefits:

• You earn incremental income on a monthly basis that accrues with each day that passes
  
• Your positions don’t change which means that you still receive dividends on stocks that you lend and stand to gain from any upside movement of their prices
  
• You have online access to information regarding your securities that you lend, the interest rates that you earn, along with anything related to your portfolio valuations

Before you apply for this program, make sure you understand some implications though…

For starters, the interest rate will depend on how high the short-selling demand is. There’s also no SIPC protection if the short seller defaults on a stock of yours that Fidelity has lent them. At last, when you lend a stock, you don’t have any voting rights. To vote, you will have to stop lending it first.

Verdict: how do i stop fidelity lending my shares?

As I told you, Fidelity does lend your shares, but only if you have a margin account or have enabled Level 3 and 4 options trading permissions. If you don’t want them to do this, you can opt out by simply moving to a cash account.

It’s important to know that Fidelity makes money from lending your shares because they give them to short sellers, but they take all the risk.

However, by letting them do this, you allow short sellers to short the companies you have ownership in. Just keep this in mind if you don’t necessarily need a margin account and Level 3/4 options trading permissions.

Also, you should remember that there are no benefits to compensate for the issue mentioned above. Fidelity does not offer any benefits when you allow them to lend your shares to short sellers.

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