Fully paid securities lending (FPSL) lets you passively earn income by allowing M1 to lend out stocks you fully own, while you retain important ownership benefits. This article explains how FPSL works at M1 Finance, your potential earnings, the associated risks, and answers common questions.
What Is Fully Paid Securities Lending?
When you participate in FPSL at M1, you authorize us to lend your fully owned stocks to other financial institutions (such as banks, market makers, and institutional investors). These institutions borrow shares for reasons like facilitating short sales or settling trades.
In return, the borrower pays a fee to M1, and we share a portion of that revenue with you.
How much can you earn with FPSL?
You automatically earn 10% of the revenue generated from lending out your shares.
You don’t need to choose specific stocks or manage offers—FPSL is managed automatically if you’re enrolled and eligible to participate in the program.
Note: The total amount earned depends on the demand for your securities and the duration your shares are on loan.
What happens to your stocks while on loan?
The stocks remain economically yours—their value moves up or down as usual, and you can sell them anytime, even if they're loaned out.
Temporary voting rights and legal ownership shift to the borrowing institution while the shares are on loan.
Once returned, you regain all ownership rights.
How is SIPC coverage impacted?
Stocks on loan are not covered by SIPC during the loan period.
Instead, we require borrowers to post cash collateral, usually at least 100% of your stock’s value. This collateral is held at a third-party bank for your protection.
If M1 cannot return your stock, we will repurchase the shares in the market and deliver them to your account.
How are dividends handled on loaned stocks?
If your stocks receive a dividend when loaned through fully paid securities lending, you’ll receive a substitute dividend payment, also known as a dividend in lieu (DIL).
Although the payment amount is the same, substitute payments in lieu of dividends are non-qualified and will be reported on tax form 1099-Misc and taxed as ordinary income.
Note: Consult a tax adviser if you have questions about how substitute payments are taxed.
What are the tradeoffs of participating in FPSL?
While FPSL offers the benefit of earning extra income, there are some tradeoffs:
You temporarily forfeit voting rights for any loaned shares.
Dividends paid become substitute payments (dividends in lieu), which may be taxed at a higher rate than qualified dividends.
No SIPC protection on loaned shares; collateral is used instead.
Why does M1 offer FPSL?
Securities lending helps M1 generate revenue, which supports our commission-free platform and the investment tools we provide to clients.
How do I enroll, check status, check FPSL income earned or opt of of securities lending?
Most clients opt-in to securities lending when creating their M1 login for the first time.
To check if you’re currently enrolled in securities lending, or to re-enroll after previously opting-out,
Log in to your M1 account
Click on your profile name icon
Click on Accounts
Click on Fully paid securities lending
View your enrollment selection or income earned (if enrolled and eligible to participate)
You can opt-out of participating in fully-paid securities lending at any time by sending an email to M1 at [email protected] with “Securities Lending Opt-Out” as the subject line. Please include the last 3 digits for each account number you would like unenrolled.
*M1 Finance, LLC does not charge commission, trading, or management fees for self-directed brokerage accounts. You may still be charged other fees such as M1’s platform fee, regulatory fees, account closure fees, or ADR fees. For a complete list of fees M1 may charge visit M1’s Fee Schedule.
Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.
All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.
Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.
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