What is the requirement for a broker-dealer if a customer wants their lent securities returned and the broker-dealer cannot locate them from another source?

In the scenario where a customer requests the return of lent securities and the broker-dealer is unable to locate those securities from another source, the broker-dealer is obligated to return the securities to the customer. This obligation stems from the nature of the lending agreement, where the broker-dealer acts as a custodian of the customer's assets and is responsible for ensuring their safe return upon request.

When securities are lent out, they are typically done so under specific terms that require their return. If the broker-dealer cannot find replacements or substitute securities, they must honor the original terms of the loan by returning the actual securities or equivalent ones to the customer. This requirement protects the rights of the customer and ensures the integrity of the lending process.

The other options do not accurately represent the appropriate actions a broker-dealer must take under such circumstances. For instance, buying new securities may not be feasible or necessary if the original ones are still on loan or if a suitable substitute is unavailable. Similarly, refunding the customer or charging additional fees would not align with the regulatory obligations and fiduciary duties the broker-dealer holds in managing client assets.