Alan Cabral Published in Journal of Pension Benefits "Securities Lending: The New Landscape"

Alan Cabral’s article, “Securities Lending: The New Landscape,” was published in the Winter 2008 edition of the Journal of Pension Benefits.

For over twenty-five years, pension plans have been allowed to engage in securities lending under Prohibited Transaction Class Exemptions 81-6 and 82-63. Under these exemptions, however, plans could lend only to U.S. broker-dealers and U.S. banks. In addition, collateral provided in exchange for securities was limited to cash, U.S. government securities, or irrevocable bank letters of credit. In 2006, the DOL issued new Prohibited Transaction Class Exemption 2006-16, allowing plans to lend securities to foreign borrowers and permitting the use of foreign collateral.

Alan’s article gives an overview of securities lending and reviews the new requirements of PTE 2006-16. The author notes that the volume of securities lending transactions has grown tremendously over the past 30 years (from $1.5 billion in 1976 to $4 trillion in 2006), and the new exemption is intended to allow pension plans to take advantage of the growing opportunities for securities lending in international financial markets.