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I read in an email from Fidelity regarding their "Fidelity’s Fully Paid Lending Program":

Keep in mind that while your securities are on loan, there is the potential for downward pressure on the price of loaned securities due to short selling; there are differences in the way any dividends received are taxed and in proxy voting rights; and Securities Investor Protection Corporation (SIPC) coverage does not apply.

Why would I care about "potential for downward pressure on the price of loaned securities due to short selling" when loaning securities? Is that because it increases the risk of counterparty default?

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    "potential for downward pressure on the price" is an idiotic way to say "the price may go down".
    – Fattie
    Commented Nov 17, 2020 at 18:36

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If you own a stock, do you want the price to go up or to drop? Downward pressure isn't your friend.

Secondarily, if your shares are loaned out to a short seller and he is short on the ex-div date, the buyer of the borrowed shares receives the dividend. The share lender (you) receives payment-in-lieu (PIL) from the short seller which does not qualify for the qualified dividend rate and is taxed at ordinary income rates.

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