Receipt of a Payment in Lieu of dividend ('PIL') is generally a result of carrying a debit cash balance. Customers maintaining a debit cash balance are subject to having their shares re-hypothecated by IBKR, which can cause receipt of PIL instead of ordinary dividends. For Interactive Brokers LLC customers, 140% of the debit cash balance in stock value can be unsegregated and therefore become subject to receiving PIL.
How can I stop dividend payments from being classified as Payment in Lieu (PIL)?
Powered by IBot
How are dividends paid out?
IBKR will reflect upcoming dividend payments as an accrual in client accounts on or shortly after the ex-dividend date. Upon receipt of the funds through our clearing agent or depository, the accrual will be reversed from the account and the cash dividend will be allocated to the Cash Balance of the account. This action typically will occur on the announced payment date of the dividend…
What is Payment in lieu (PIL) of Interest and Dividends?
A Payment in Lieu, (PIL) refers to a cash credit or debit made to an account in recognition of a cash dividend paid to stockholders of the issuer.
Received…
Why did I receive a Dividend Gross-Up Payment?
Your account was lending shares of stock on the stock’s dividend record date. Instead of being paid a dividend, you were paid a Payment-in-Lieu of a dividend, or “PIL.” As a US taxpayer, you may experience adverse tax consequences from receiving PIL, instead of the dividend directly from the issuer, while shares were on-loan. This payment is your compensation for potential adverse tax consequences, and is called a “Gross-Up.” …
How does Interactive Brokers LLC determine the amount of shares which are eligible to be loaned?
The first step is to determine whether securities are considered fully-paid for or if they are rehypothecated as collateral for a margin loan balance. A broker who finances client purchases of securities via margin loan is allowed by regulation to loan or pledge as collateral that client’s securities in an amount of 140% of the cash debit balance. For example, if a client maintaining a cash balance of $50,000 buys securities with a market value of $100,000, the debit balance will be $50,000. The broker holds a lien on 140% of that balance or $70,000 of securities. Any securities held by the client in excess of that amount are referred to as excess margin securities ($30,000 in this example) and are required to be segregated unless the client provides authorization to Interactive Brokers LLC to lend through the Stock Yield Enhancement Program. Note that only $30,000 of securities is eligible to be lent via SYEP…