Cooper Review Calls For Tighter Regulation Of Super Fund Stock Lending

Post by NeilMc on December 21, 2009 · Under Business News, Capital Markets, Super Funds, investments · Comment

Australia’s super fund industry will be allowed to continue the controversial practice of stock lending, but may end up being more tightly regulated in order to curtail any elevated risks that they may face as a result of the practice.

A government review of the super fund industry, the results of which were released on Monday, made some recommendations towards the regulation of the industry, including managers disclosing their fund’s stock lending policy, and the fees paid to the fund for engaging in stock lending.

“Disclosure should also be made about who retains voting power over the securities,” the report said.

Stock lending is a practice conducted by investors globally, where those investors lend the stock of companies they own to other investors looking to short the stock, and in return the original owners receive a fee paid by the borrower of the stock.

The stock lending business is estimated to be worth $20 billion in Australia alone, and at the height of the equities boom during the middle of the decade the Australian Securities Lending Association estimates that the value of equities lent touched between $70-$80 billion.

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