Jan. 04, 2022
In regards to the aforementioned issue, I would like to highlight some concerns I have as a retail trader. The subject proposed rule enables and perpetuates on-going systemic problems. Real reform for securities lending must include eliminating “Onward Lending” completely. Public companies and transfer agents have agreed on this for decades, pointing to Onward lending as a source of phantom shares and over-voting in matters of corporate governance. Clearly, loaning shares which do not in fact exist or are already lent out, is fraudulent and does not satisfy the SEC's own guidelines. To wit, onward lending is diametrically opposed to the requirement that broker-lenders maintain a reasonable belief that securities will be available when delivery is due. In plain fact, the current system operates in clear opposition to this requirement. Onward lending creates an impenetrable, convoluted mess of lending and re-lending with no effective controls or measures of the legitimacy of the lent shares. The current system is constructed specifically in a manner which makes it impossible for broker-lenders to even establish if shares can be considered reasonably available. To wit, with onward-lending, there is never such thing as a shortage of shares. Currently, broker-lenders can perpetually lend previously lent shares as many times as they want. Thusly broker-lenders and their transacting parties will always have a reasonable belief that "shares" will be available (they have an infinite reserve of re-lendable shares after all). Such an arrangement is license to fleece the American people, to hamper companies producing real value by artificially diluting the real share count, and to destroy international faith in the legitimacy of the American securities market, and in turn threatens the world economy. Respectfully, Casey Baker