when a security is transferred as part of the lending agreement all rights are transferred to the borrower this includes voting rights the right to dividends and the rights to any other distributions often the borrower sends payments equal to the dividends and other returns back to the lender 
example of securities lendingsuppose an investor believes that the price of a stock will fall from its current price of 100 to 75 in the near future the stock is not very volatile and generally trades in defined ranges in order to profit from this thesis the investor borrows 50 shares of the company from a securities firm and sells them for 5 000 50 shares x 100 current price assuming the share price drops to 75 the investor will then purchase 50 shares for 3 750 50 shares x 75 price and return them to the securities firm in this case the profit on this short sale transaction is 1 250 5 000 3 750 however short sales do not always work out as planned if the investor has miscalculated and the company s shares end up increasing in price rather than decreasing the investor will have to purchase the stock back at a higher price than the price at which they sold it and will incur a loss on this transaction 