Sino Agro Food Inc (fka SIAF)

[rr8548t]

NO! It's a message board myth. It does NOT work that way. You can set a sell order at 5000 USD and they will still loan out your shares.

TF is correct in that it is a myth, I can attest to this. My broker has used shares from my margin account to loan out many times even in situations where I have had an active limited sell-order for shares with a target price for example only about 5-10% above current share price (btw the purpose of these sell-orders have been to sell the shares when the target price was reached, not to try to block the shares from being loaned out). How do I know? It is easy to see on your monthly brokerage statements when the dividends are paid out. Instead of receiving dividends from the whole block of shares owned (let's say that I owned 100 shares in company ABC), I received dividends for example from only 80 shares. These are the shares that were not on loan to someone else. I received cash (substitute payments) in lieu of dividends for the remaining 20 shares that I owned but were on loan by the broker.

There are two main problems with this in my opinion:
1. I end up paying more in tax. Cash received in lieu of dividends are taxed at a persons marginal tax rate, while dividends are taxed at a lower tax rate.
2. My long position is at least temporarily impacted negatively since someone uses “my” shares to take a short position.

The only thing you can do besides getting your share certificates (the only 100% sure thing) is change your account from a margin account to a cash account. Legally the broker is not allowed to loan out your shares in a cash account. That doesn't mean that they wouldn't do it in certain cases (if they don't care about the legal implications) but most of them do accept that rule.

Correct, the broker is by law prevented to loan out shares from a person's cash account. But just as TF states, the only way to be 100% sure is to be in possession of the stock certificates.