Wealthsimple’s Stock Lending feature will allow clients to participate in something commonly known as Fully Paid Lending. Stock Lending allows you to earn passive income on stocks you already own by lending your shares to other investors for a fee. These investors will use your shares to facilitate several trading activities such as covering their own failed trades, short selling, hedging or arbitrage.

Once Stock Lending becomes available, Wealthsimple will do the work to find borrowers for your stocks and you get paid if there is a match through a revenue sharing model called Pooled Profit Sharing. This means that you will start earning income through Stock Lending as soon as there is an investor that borrows your eligible stocks. 

Keep reading this article to learn about the following:

• Benefits of Stock Lending
• Tradeoffs of Stock Lending
• Revenue sharing and allocation
• Fees
• Eligible securities
• How to participate in Stock Lending
• How to stop participating in Stock Lending
• How to view your loan confirmations and details

Benefits of Stock Lending

There are many benefits to participating in Stock Lending. These can include:

• Earning passive income
  With Stock Lending, you can earn a form of income by lending out stocks that you already own.
  Note: Stock Lending can help you earn more from your portfolio, but participating does not guarantee your shares will be loaned.
  
  
• Keeping ownership of your stocks
  With Stock Lending, you do not lose economic ownership of your stocks. This means you will still be able to sell them at any time and realize gains or losses as normal.
  
  
• Keeping your assets protected with Wealthsimple
  Wealthsimple protects your assets when you participate in Stock Lending. In return for lending your stocks, Wealthsimple allocates cash collateral to the trustee account to secure the amount of the loan. We will allocate cash collateral to a Trust account equal to 100% of the market value of your loaned stocks or ETFs plus any additional cash collateral that we receive from the borrower.

• Everyone is eligible with Wealthsimple
  There is no minimum amount you need to hold in your portfolio to be eligible to participate in Stock Lending. As long as you have funds in a DIY trading TFSA or Personal (non-registered) account with Wealthsimple, you will be able to participate in loaning your stocks.

Tradeoffs of Stock Lending

It is also important to understand the tradeoffs of Stock Lending before you agree to participate. These can include:

• Giving up your voting rights
  If you successfully lend out your shares through Stock Lending, you will temporarily be giving up your voting rights. These voting rights are given up until your shares are returned.
  
  
• Losing CIPF coverage
  The Canadian Investor Protection Fund (CIPF) does not provide coverage for stocks that are lent through Stock Lending programs. With that being said, Wealthsimple provides collateral to protect clients in the event that the shares are not returned.

Please see our Risk Disclosure Document for a more detailed description of the tradeoffs associated with Stock Lending. 

Revenue sharing and allocation

Wealthsimple will use Pooled Profit Sharing for revenue sharing and allocation. This means that every time we initiate a trade to lend out one of our clients shares, all of our clients who have agreed to participate in Stock Lending and who own shares of that security will have their prorated portion of total inventory lent out. They will then receive the same prorated portion of revenue.

Example
Let’s say that Wealthsimple initiated a trade to lend out 300 shares of stock ABC. Below, you can see how Pooled Profit Sharing would impact different clients based on the number of shares that they owned: 

More details: 

• The portion of total inventory is calculated and reallocated on a daily basis
• Revenue is calculated on a daily basis and distributed on a monthly basis
• Wealthsimple will post daily loan confirmations to advise you of your loaned positions
• Clients will receive 50% of the revenue (see more on this below). 

Fees

There are no fees to participate in Stock Lending with Wealthsimple. Instead, you will earn 50% of the income that your loaned stocks generate. 

Example
Let’s say you have a $12,000 portfolio with Wealthsimple, and you agree to participate in Stock Lending. If you were to loan all your shares at a lending rate of 8%, you could expect the following:

• The total amount of earnings that your stocks will generate in one month will be $80.00
• The amount of revenue allocated to Wealthsimple would be $40.00
• The amount of revenue that you would earn that month would be $40.00

Eligible securities

Eligible securities include securities that meet any of the following criteria: 

• Stocks that have a 6-month average volume weighted average price (VWAP) greater than or equal to $2.00
• Stocks that have a 6-month average daily trading volume greater than or equal to 100,000 shares
• Stocks that have a 6-month average free-float market capitalization greater than or equal to $200 million

Ineligible securities that won’t be participating in Stock Lending include: 

• Any dividend-paying stocks
• Any fractional shares

Participate in Stock Lending

To agree to participate, follow the steps below. Stock Lending is only available through the Wealthsimple mobile app.

1. Log in to your Wealthsimple mobile app
2. Tap the Invest tab at the bottom of your screen
3. Choose a trading account you wish to loan stocks from
4. Scroll down to Introducing Stock Lending and tap the arrow icon
5. Read through the information provided then tap Continue to agreements
6. You will see a new set of account agreements with Stock Lending included
7. Review the new agreements, check the box that you agree to the Stock Lending agreement and tap Confirm to participate

Participating in Stock Lending will make all of your eligible accounts participate in Stock Lending. If you wish to exclude one of your accounts, you can exclude that account on an individual basis. 

Stop participating in Stock Lending

If you previously agreed to participate in Stock Lending and no longer wish to, follow these steps:

1. Log in to your Wealthsimple mobile app
2. Tap the Invest tab at the bottom of your screen
3. Choose the account that your stocks are loaned in
4. Under Stock Lending, tap Manage
5. Scroll down to the bottom of your screen and tap Manage Settings

To exclude specific shares from Stock Lending, or to recall your shares in order to participate in voting, please contact our support team. Our team will be able to help you exclude shares on an individual basis. 

Similarly, you can set a limit for the total dollar amount that you lend out by contacting our support team.

View your loan confirmations and details

Wealthsimple provides loan confirmations for each of your eligible shares that have been loaned through Stock Lending. To view your loan confirmations, follow these steps: 

1. Log in to your Wealthsimple mobile app
2. Tap the Invest tab at the bottom of your screen
3. Choose the account that your stocks are loaned in
4. Under Stock Lending, tap Manage
5. Select view all lending activities

You can also see your loan activity by following these steps:

1. Log in to your Wealthsimple mobile app
2. Tap the Settings tab at the bottom of your screen
3. Select Activity
4. Tap Filter and select Stock lending under Activity Type
5. Here you will see all your loan activity