That's the issue - I have NEVER BORROWed or had a debit bal. I use the margin for collateral (rather than cash) on naked short options but never have had a debit bal. The broker has "interpreted" the margin agreement to "mean" that is the same as a debit bal.
Is that true with IB ? I thought one could elect to participate or not in their stock loaning program.
My understanding is that all securities in a margin account can be held in street name - meaning it can be lent out and you don't get the qualified dividend status. This should make sense since at any moment a security in a margin account may need to be pledged as collateral. For cash accounts, you can demand the securities held in your name.
...and the prob is even more insideous when the lent security is an MLP or a REIT - the accounting becomes a freekin nightmare because you DON'T get a K-1 whim there is the PIL (payment in lieu. I'm trying to make the case that , absent an actual debit balance, they should not lend out securities, especially considering the draconian consequences of 'conerting a totally tax free dividend to a non qual. totally taxeable (at higher rates) income. I don't think the broker is intentianally trying to pull a fast one , I think some hotshot fund manager may have figured out how to legally 'launder' the dividends and get a tax deduction for the PIL as well - pretty clever but horrible consequence to the victim - I mean - customer.
I thought the securities held in street name are in effect one pool of stocks. Then the broker calculates the percentage of the securities that are fully paid for. Then they can only lend out the % not paid in full, even in a margin account. I don't think it is segregated by account, unless you have a cash account. Those securities can't be lent out. I'm not sure of the details. If you are that concerned, trade in a cash account.