Hey guys, it's sasha, so last night trading 212 sent emails and notifications to their customers with yet another update to their terms and conditions, as most of you probably haven't, read these and won't be reading these terms conditions. I thought i'd read them for you and tell you exactly what's changed and, as you might have guessed, there are some nasty surprises in there. I think some of these changes will really not make you feel too happy. The truth is all of these changes in these new terms.

Conditions are to do with lending your shares out. So let me tell you what i think about these changes now. All of these new changes only apply to the invest account and not to the isa, so you'll need to be in your invest account in order to see that notification and that's because shares held in your isa account cannot be lent out. So if you only use the trading to want to ice account, these changes won't apply to you now.

Lending shares is nothing new for trading 202. The concept was already in place in the last set of the terms conditions updates, and this is one of the ways in which they actually make money, because the only other fee they charge is a 0.15 foreign exchange fee on transactions. That is not a huge amount and because they are a for-profit business. Unsurprisingly, they do actually want to make some money from somewhere else, unlike their cousins over in the united states, selling order flow is not legal in the uk, so lending out shares is about the only other major available option, so here is what's actually changed.

First, off trading to one two have made the wording around share lending a lot more direct and a lot more obvious, starting with the title. The title of clause 22 used to be securities financing transactions and now is just securities lending. There are four new sections that have been added in and all seven of the old ones were rewritten in a big way. There is no way to opt out of this.

If you have a trading 202, invest account. You automatically agree to trading 202 being able to lend your shares out that bit actually hasn't changed. It's just worded a little bit more clearly. Now.

Let me start with something that i haven't seen. Anyone else mention they really really buried. This change - and it's bad here, is what the new section 22.9 says: shares that you lent to us and which we lend out to the borrower are generally recalled from the borrower before x, dividend date in order to capture the dividend where the recall does not take Place we will be entitled to a payment from the borrower and you will be entitled to a payment from us equivalent to the dividend you would otherwise have received. Please note that the aforementioned payment may have different tax implications.

You remain responsible for any and all tax obligations that may arise in connection with the aforementioned payment. So if the shares that you own earn a dividend, while they are lent out, you will get the money, but it is actually the hedge fund or whoever it is, that receives the actual dividend, and this is really important. This means that, although you do get the money in the end, the money you receive will technically not be a dividend, it will be income now. They are not saying this explicitly because they operate in different jurisdictions, because it kind of sounds a little bit like tax advice, but they are implying it very heavily by saying that these payments may have different tax implications.

So that means that trading 202 can decide whenever they feel like it to lend your shares out, and if they decide to do it, you will have to pay income tax and national insurance on it or whatever. The equivalent is in the country that you live in. At the highest rate that you're paying it on your salary, so if you're a higher rate taxpayer in the uk and you have a dividend portfolio sitting with trading one two, i hope you like earning only half of the dividends when traded on two feels like earning A bit of cash by lending your shares out this seems pretty absurd. Now, technically, this was probably roughly the same in the shorter old terms and conditions, but the fact that they've decided to add this entire clause that clarifies this in such great detail kind of suggests that they want to avoid having any responsibility for causing these kind of Tax issues and implications down the line.

Another thing that is changing is the security element with lending your shares out when your shares are lent out. The borrower of those shares the hedge fund, or whoever it is, will put up some collateral, and this has actually improved compared to the last set of terms conditions. The collateral used to be cash. The trading 212 would just hold themselves and that created a risk.

If trading 202 were to become insolvent, for example, while your shares are being lent out, then you technically could lose your money, because your shares are not held in a segregated account. They've been lent out to whoever it is, is borrowing them and the cash that's being held as collateral is being held by trading to one to themselves and according to the previous wording, which was not very clear on this. That kind of suggests that you could have lost your money in that situation. Now, after this change, the collateral will become u.s treasury bonds, and these will be held in a segregated account.

You can read this in section 22.5 of these new terms, conditions and a lengthy statement that says pretty much the same thing in the risk: disclosure as well. The collateral covers 102 of the value of the shares that are being lent out, and this is good. The amount of collateral is adjusted on a daily basis, and this is actually very good in the way it's set up, because if a crash was to happen or some other major event where trading 202 stopped operating. For whatever reason, the likelihood is that the value of the stock market would fall too, and at that point the value of the collateral held on that day will be 102 of the previous trading day's value so which is going to be higher.

So that means that the transactions would go on hold at that point, probably in presuming that the fscs and fca come in and actually do something. That means that it should be more than enough to cover any liabilities to those of us who hold hold those shares that have been lent out. So that's actually kind of good. Now, technically, there is a risk of the opposite happening, but the market doesn't have a history of suddenly rushing upwards by a huge amount in one trading day, and if it did, it is unlikely to cause trading two on two to collapse as a result, because things Will be booming, there'll, be lots of fees collected and so on now, treasury bonds are good because they are relatively liquid and because they're held in the segregated account, and that adds to your level of security.

Now, let's talk about the different scenarios. Let's say that you hold your shares and they are not being lent out in that case. If, for example, trading 212 was to go under and you had shares with them, you'd still be able to get your shares back because they are held in a segregated account with a third party. Now, if your shares are lent out at that point, then the collateral is also now going to be segregated.

So you will still get your money back now if the borrower of those shares collapses, but the other two remain like the hedge fund that goes down. You'll still have that collateral, so you'll still be able to get your money. So that's great, because if any one of these parties goes down, you don't get to lose your money now, if the third party, who they haven't actually named the one that holds your collateral, they collapse, but the borrower of the shares the hedge fund does not, then You'll also still get your shares back so all good on that front, but you still have a counterparty risk because if at least two of these different people involved in this complicated setup collapse, at the same time, then you're gon na run into some kind of trouble. For example, if the company that owns your collateral collapses and that causes trading to one two to collapse because they become insolvent as a result, then you will lose your money because all of your investments will be gone and you won't be able to recover them, because Your collateral is gone and trading two on two has also gone if the company that holds the collateral collapses and the borrower the hedge fund also collapses.

At the same time, then you will again have lost your investment. In that case, trading 202 is probably almost certainly also going under, but that's besides the point. In any case, the likelihood of any one of these parties going down is really pretty low and the likelihood of two of them going down at the same time is much lower. The exposure of these hedge funds that they're likely to deal with to the specific individual uk companies that will hold the segregated collateral is gon na, be in the grand scheme of things relatively small.

So balance is not a huge deal in my personal opinion, but what is a big deal and will really annoy the wall? Street best community is the voting rights. This has been something that people have asked for some time, but these new terms conditions make it explicitly clear if your shares are lent out. You cannot use your voting rights. In fact, the company that borrowed them gets to vote instead, the hedge fund.

So if, for example, you are sitting there, you are owning a load of amc stock, you're, an ape and a hedge fund turns up to trading 212 and borrows your shares for the time when the vote is due to happen to try - and you know screw you Over then, you get to not have a vote and they, the hedge fund, get to vote on all the issues in a way that suits them and if they borrow enough shares from those different investing companies that allow them to do that, then they could have a Pretty big number of votes, which doesn't sound very fair, and i have a feeling that some people will be really unhappy about this now. These changes - all of these - that i just discussed, are only coming in on the 18th of july 2021, but you'll notice that for some reason, trading 202 have actually gone and published them. You can see them on the website already they're the live version right now, despite them not actually being live for another month, but is that a sign? Are they going to start accepting new accounts soon now that they've resolved these other issues and they've set up? This share lending. Why were they going to update the test conditions now if they weren't intending to accept new accounts? Maybe we're about to see maybe this weekend or maybe in the next couple weeks, we're gon na see new accounts actually open up, or are they going to wait until all customers have had the terms conditions upgraded in july and open up to new accounts soon? Well, i guess we will find out soon enough.

It's been incredibly long already. I know for anyone waiting, it's been a crazy amount of time. Thank you so much for watching. I really really appreciate it and, as always i'll see you guys later,.