In a securities lending arrangement, which party maintains beneficial ownership of the securities?

In a securities lending arrangement, the lender maintains beneficial ownership of the securities. This means that while the lender temporarily transfers the physical possession of the securities to the borrower, the ownership rights associated with those securities—such as entitlement to any dividends, voting rights, or potential appreciation—remain with the lender.

The lender enters into a lending agreement with the borrower, allowing the borrower to use the securities for a specific period. In return, the borrower typically provides collateral to the lender, ensuring that the lender is protected against any potential risk of default. However, because the beneficial ownership is not transferred, the lender can still claim all applicable rights for the securities during the term of the loan.

This structure is crucial because it allows the lender to continue to retain the economic interests related to the securities even while they are on loan, which is essential for maintaining the integrity of ownership during this transaction.