fhubert
Re:Dole Food Had Too Many Shares
on Friday February 17, 2017 @01:47PM (#13670645)
Most broker agreements allow them to lend out your shares without your consent or knowledge. It actually works against the long stock holders, but it does help brokers to lower their customers' transaction fees.
Even worse is Naked Short Selling, a practise where short sellers don't borrow the shares in the first place. This artificially creates shares and dilutes the value of the stock being shorted. Although illegal since Reg SHO was introduced, it still goes on due to lack of enforcement and comically low fines - google "Reg SHO Violations".
Some public pension funds forbid the lending of the shares they own for shorting. The minimal interest gained by lending shares is not worth the downward pressure to the stock price created by the short which undermines the asset value.