PGIM Funds Switch to eSeclending
An SEC filing for PGIM Ultra Short Bond ETF and several other PGIM funds tells us, "Effective July 1, 2022, Securities Finance Trust Company ('eSeclending') will replace Brown Brothers Harriman & Co. ('BBH') as securities lending agent for the Funds. Additionally, on or about June 3, 2022, The Bank of New York Mellon ('BNY') replaced BBH as Custodian Agent, Transfer Agent and Administrative Agent to the Funds.... Unless otherwise noted, the Funds may lend its portfolio securities to brokers, dealers and other financial institutions subject to applicable regulatory requirements and guidance, including the requirements that: (1) the aggregate market value of securities loaned will not at any time exceed 33 1/3% of the total assets of the Funds; (2) the borrower pledge and maintain with the Funds collateral consisting of cash having at all times a value of not less than 102% (or 105% for foreign securities) of the value of the securities lent; and (3) the loan be made subject to termination by the Funds at any time." It also says, "Cash collateral is invested in an affiliated prime money market fund and will be subject to market depreciation or appreciation. The Funds will be responsible for any loss that results from this investment of collateral. The affiliated prime money market fund in which cash collateral is invested may impose liquidity fees or temporary gates on redemptions if its weekly liquid assets fall below a designated threshold. If this were to occur, the Funds may lose money on its investment of cash collateral in the affiliated prime money market fund, or the Funds may not be able to redeem its investment of cash collateral in the affiliated prime money market fund, which might cause the Funds to liquidate other holdings in order to return the cash collateral to the borrower upon termination of a securities loan.... On termination of the loan, the borrower is required to return the securities to the Funds, and any gain or loss in the market price during the loan would inure to the Funds. If the borrower defaults on its obligation to return the securities lent because of insolvency or other reasons, the Funds could experience delays and costs in recovering the securities lent or in gaining access to the collateral. In such situations, the Funds may sell the collateral and purchase a replacement investment in the market. There is a risk that the value of the collateral could decrease below the value of the replacement investment by the time the replacement investment is purchased." PGIM adds, "During the time portfolio securities are on loan, the borrower will pay the Funds an amount equivalent to any dividend or interest paid on such securities. Voting or consent rights which accompany loaned securities pass to the borrower. However, all loans may be terminated at any time to facilitate the exercise of voting or other consent rights with respect to matters considered to be material. The Funds bears the risk that there may be a delay in the return of the securities which may impair the Funds' ability to exercise such rights."
