Do You Hand Over Your Shares Before You’re Paid?
Not in a way that gives the lender control first. At Black Haven, your shares are delivered into a custody account in your name, or the pledgor’s, just before funding, and the lender’s control over that account takes effect only at the same time as the loan is paid out. Until then, the lender has no control over them.
Do you hand over your shares before you’re paid?
In one sense yes, and in the sense that matters, no. The shares are delivered into custody before the loan is funded, because a stock loan is paid out against collateral that is already in place. But they are not handed to the lender. At Black Haven they go into an account in the borrower’s or the pledgor’s name at an independent custodian, and the lender’s control over that account takes effect only at the same time as the loan is paid out. Delivery and control are separate steps, and the closing sequence keeps them apart until funding.
That is the answer to the question most borrowers are really asking: what stops the lender holding the shares while the money is still to come? The account is not the lender’s, and until the payout the lender has no control over it. The sequence below shows where each step falls.
What is the closing sequence for a Black Haven stock loan?
Seven steps, in a fixed order, from the countersigned term sheet to funding. Indicative terms come first, prepared from three pieces of information about the holding. Once the borrower countersigns the term sheet, the rest follows in the order set out below: KYC comes before any document that commits the shares, the loan agreement is signed before the custody account is opened, and the shares move only after the funding notice.
| What happens | |
|---|---|
| 1. Term sheet | The borrower countersigns the term sheet. |
| 2. KYC | The KYC questionnaire follows, completed by every borrower and pledgor, including beneficial owners. |
| 3. Loan agreement | The loan agreement is signed once KYC is complete. It names the custodian. |
| 4. Custody account | An account is opened at the custodian in the borrower’s or pledgor’s name. The custodian’s settlement instructions (SSIs), issued after signing, show the sub-custodian in the home market. |
| 5. Funding notice | A funding notice is issued. |
| 6. Delivery | The shares are delivered into the custody account, through the sub-custodian in the home market’s central depository. |
| 7. Funding | The loan is funded. The lender’s control over the account takes effect at the same time as the payout. |
Why are the shares delivered before the loan is funded?
Because the loan is paid out against shares that are already in custody, delivery has to come first. The funding notice tells the borrower that the facility is ready to fund; the shares are then delivered into the custody account, and the loan is funded. What keeps that order safe for the borrower is where the shares go and when the lender’s rights begin. The account is in the borrower’s or the pledgor’s name, not the lender’s, and the lender’s control over it takes effect only at the same time as the loan is paid out. Delivery moves the shares to the custodian; it does not, by itself, give the lender control of them.
Delivery runs through the home market’s own settlement system, so its timing follows that market’s cycle, which varies by exchange and is shown for every market on the markets page.
Where do the shares go, and in whose name?
Into an account in the borrower’s or the pledgor’s name at an independent custodian in The Bahamas, regulated by the Securities Commission of The Bahamas. The custodian holds the shares through a sub-custodian in the home market’s central depository, such as KSEI in Indonesia, CCASS in Hong Kong or CDP in Singapore. The custodian is named in the loan agreement, and the sub-custodian appears in the custodian’s settlement instructions (SSIs) after signing, which is when you know exactly where the shares are to be delivered. Shares left with the borrower’s own broker, or in other local custody, are not accepted as collateral, so delivery into this account is part of every facility. The full custody chain is explained in where your shares are held during a stock loan.
What if the loan is not funded?
The point at which the lender gains control is the payout itself. Because the lender’s control over the custody account takes effect only at the same time as the loan is paid out, delivering the shares does not, on its own, give the lender control of them. What then happens to an account if a facility does not fund, and how the shares would move back out of it, is governed by the loan agreement and the custody documents. That is a point to read with your own counsel before delivery, rather than to assume.
How is this different from handing shares to a lender?
Some structures do transfer the shares to the lender. In a share repo or another title-transfer arrangement, legal title passes to the lender, which must return equivalent shares at the end and may be able to use them in the meantime, as set out in share repo vs stock loan. A pledge works differently: the shares stay in an account in the owner’s name, and the lender holds a security interest over them. In a Black Haven stock loan the account is in the borrower’s or the pledgor’s name, so the question of hand-over comes down to the timing of control, and control is tied to the payout.
Frequently asked.
01When does the lender get control of the custody account?
02Whose name is the custody account in?
03Can I keep the pledged shares with my own broker?
04What is the order of steps from term sheet to funding?
Keep reading.
What Do You Need to Send for Indicative Terms?
What do you need to send for indicative terms on a stock loan? The borrowing entity, the issuer and number of shares, and a recent depository statement.
Read → Custody · October 27, 2026Where Are Your Shares Held During a Stock Loan?
Shares held during a stock loan sit in an account in your or the pledgor’s name at an independent custodian, via a sub-custodian in the local depository.
Read →
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