Commentary on Sections Overview Chapter 2: Accrued income profits and losses Section 653: Stock lending
1933.This section excludes stock lending transactions from the accrued income scheme. It is based on section 727 of ICTA.
1934.Broadly, stock lending is a mechanism by which a securities dealer makes an arrangement for an institutional investor to place some of its securities at the dealer’s disposal. The dealer is therefore able to deliver securities the dealer has contracted to sell even if the dealer has been unable or unwilling to buy them in the market. (The dealer undertakes to return the securities, or equivalents, to the institution later. Although the mechanism is referred to as “lending”, the securities do change ownership.)
1935.As the lending institution is entitled to the return of securities of the kind transferred under the lending arrangement, and effectively retains rights to the interest on them, the accrued income scheme disregards stock lending transfers.