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He argued: “If pension funds do not lend securities, returns will be lower.” That said, the buying of voting rights is relatively rare and the administrative requirements of implementing bans on securities lending would, technically, make such legislation near impossible, according to Van Scheijndel.
“It is very difficult to reveal the fiduciary voting rights when an institutional investors lends securities, as one can lend to third parties, who can then lend it to yet another party,” he added, arguing the administrative burden would be impossible to bear.
Simultaneously, legislating on securities lending would create an exceptional position in Europe which would not benefit the market.
Less securities will be lent, according to Roel de Groot, head of KAS Bank’s treasury division. “If you create an exceptional position of Dutch lenders, then most will say they would rather not borrow,' he said.
The debate was kick-started in April when a majority of the Dutch Lower House announced it wanted to implement a law against so called ‘empty votes’ - voting with loaned shares.
Both officials concur it is difficult to strike a balance between securities lending and corporate governance, though pension funds are starting to find ways to enhance this balance.
Late last month, the giant Dutch civil service fund ABP announced it will apply a rule stating there must always be a minimum of 10% of the shares available as a base for voting.