When you have a margin account, Robinhood is authorized to lend your securities to other parties, including for short selling, and the specific securities you deposited may not be returned to you.
This analysis describes what Robinhood's agreement states, permits, or reserves. It does not constitute a legal determination about enforceability. Regulatory applicability and practical outcomes may vary by jurisdiction, enforcement context, and individual circumstances. Read our methodology
This provision authorizes use of securities held in margin accounts for third-party lending purposes, including short selling, which means customers' holdings may be used in ways that could affect market prices of those securities, and customers may receive substitute securities rather than their original holdings.
Interpretive note: The full scope of disclosure obligations applicable to securities lending from retail margin accounts continues to evolve under SEC and FINRA guidance.
Margin account customers authorize Robinhood to lend their securities to third parties, including for short sale purposes; the agreement states that customers may receive equivalent rather than identical securities upon return, and the lent securities may not benefit from the same corporate actions or protections as directly held securities.
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"You authorize us to lend, either to ourselves or to others, any securities held in your margin account. Securities lent may be used by the borrower for any purpose, including short selling. When securities in your account are lent, you may not receive the same securities back and may instead receive securities of the same class and quantity.— Excerpt from Robinhood's Robinhood Customer Agreement (PDF)
REGULATORY LANDSCAPE: Securities lending from customer margin accounts is governed by SEC Rule 15c3-3 (the customer protection rule), FINRA rules regarding use of customer assets, and SEC guidance on fully paid lending programs. Customers must receive adequate disclosure of securities lending practices under applicable broker-dealer conduct standards. GOVERNANCE EXPOSURE: Medium. Securities lending from margin accounts is a standard broker-dealer practice authorized under applicable rules, but the breadth of the authorization and the potential for conflicts of interest require adequate disclosure. Customers who hold securities in margin accounts may not be aware that their holdings are being lent. JURISDICTION FLAGS: US federal securities law governs this provision uniformly across states. However, tax implications of substitute payments in lieu of dividends received when securities are on loan may affect customers across jurisdictions differently. CONTRACT AND VENDOR IMPLICATIONS: The securities lending authorization should be cross-referenced against the company's fully paid lending program disclosures, if any, to ensure consistency. Any revenue generated from securities lending that is not shared with customers should be disclosed in accordance with applicable FINRA and SEC guidance. COMPLIANCE CONSIDERATIONS: Compliance teams should confirm that the securities lending authorization is adequately disclosed in margin account onboarding and that any conflict-of-interest disclosures required by FINRA Rule 2010 and applicable SEC guidance are current. Assess whether substitute payment tax treatment is disclosed to affected customers.
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This provision authorizes use of securities held in margin accounts for third-party lending purposes, including short selling, which means customers' holdings may be used in ways that could affect market prices of those securities, and customers may receive substitute securities rather than their original holdings.
Margin account customers authorize Robinhood to lend their securities to third parties, including for short sale purposes; the agreement states that customers may receive equivalent rather than identical securities upon return, and the lent securities may not benefit from the same corporate actions or protections as directly held securities.
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