Mutual Fund Directors Forum Issues Guidance for Securities Lending

New report highlights benefits and risks involved, geared toward responsibilities of fund boards

The Mutual Fund Directors Forum announced Thursday that it has released a special report titled “Practical Guidance for Directors on the Oversight of Securities Lending.”

The Forum’s report provides an overview on how securities lending works in order to help directors make informed decisions about securities lending in their funds, while also highlighting the risks involved in securities lending and explaining potential issues and pitfalls of which directors need to be vigilant.

“Securities lending plays a significant role in today’s capital markets and is believed to improve overall market efficiency and liquidity,” Susan Ferris Wyderko, president and CEO of the Forum, said in a statement. “In addition, securities lending plays a critical role in certain hedging strategies, acts as a useful tool in risk management and helps facilitate the timely settlement of securities trades. As such, we feel it’s important that we arm our members with educational material on this topic to assist them in their important oversight work.”

The Mutual Fund Directors Forum is an independent, nonprofit membership organization for investment company independent directors dedicated to improving mutual fund governance by promoting the development of concerned and well-informed independent directors.

“In the wake of the market difficulties over the past several years, we’ve heard from members concerned about securities lending programs,” said David Smith, executive vice president of the Forum. “With this report, our goal is to provide helpful information that may assist directors in determining how to oversee securities lending activities and in deciding what questions to ask the adviser, their portfolio managers and others involved in the process.”

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