Brokers wouldn't call shareholders asking if they would like to participate in a fully paid lending program if the brokers could raid shareholders accounts and loan shares to the shorts without a signed contract between them and the share owner.
Fidelity is currently charging shorts 48.25% on the value of AVXL shares that they borrow from them. Fidelity is paying fully paid lending program participants 30% on the value of the shares they have loaned to Fidelity. Fidelity would not pay participants this 30% if they could get around it by raiding their accounts for shares to loan to the shorts.
This happens if a shareholder signs a fully paid lending program contract with Fidelity -
Shareholder can designate how many of his shares can be loaned to Fidelity. If no designation, all shares are available to Fidelity.
This bolded info is in the Fully Paid Lending Program -
Please note that the fully paid securities on loan are not covered under the provisions of the Securities Investor Protection Act of 1970. This may be what prevents the brokers from raiding accounts for shares to loan.
Fidelity sets up an escrow account with a bank, in the shareholders name, and adjusts the dollar amount daily to match the value of the shares the share owner has loaned to Fidelity. This escrow account is to protect the shareowner now that there is no insurance on the value of the loaned shares.
Shareholder can sell the shares that he has loaned to Fidelity at anytime. Shareholder can also call and cancel the lending agreement at any time.
There may be one scenario where your broker can loan your shares without your permission. Notice that the above refers to "Fully Paid Lending Program". If your account has a margin debit, then your shares are not fully paid for. In which case, your broker owns a percentage of your shares. I do not know if this scenario would give a broker access to loan out these shares without your permission or not.
