Securities Lending

CFA Level III Equities
#1

Hello, When a passively managed fund lends a security, the borrower is liable to pay any dividends to the lender during this period. But what about any capital appreciation that takes place during this time? Because technically speaker, the lender does not have the shares as of now.

Can anyone clarify? Thanks.

#2

The borrower eventually has to return the securities, so there’s no loss of capital appreciation to the lender.

#3

Thanks. But what if the scrip appreciates during this period, and returns to its original price by the time the borrower gives it back? Is that kind of an inherent risk of this process?