Final answer:
To maintain voting rights when a security is out on loan during a proxy record date, the lender should recall the loan before the record date. This ensures that the voting rights are returned in time to be exercised. Options such as advising the borrower or submitting a substitute proxy card do not secure the voting rights.
Step-by-step explanation:
If your institution has a security out on loan when a proxy record date is announced and you wish to maintain your right to vote, the best course of action would be to recall the loan before the record date. This ensures that the voting rights are restored to your institution, allowing you to participate in the important decisions affecting the company in which you hold shares.
Option b, advising the borrower of the lender's rights, does not guarantee the return of the voting rights, as the actual securities would still be in the hands of the borrower on the record date. Option c is generally not practical, as the Depository Trust & Clearing Corporation (DTCC) typically does not facilitate the direct transfer of voting rights in such scenarios. Lastly, option d, submitting a substitute proxy card, would not be effective since you don't have possession of the shares on the record date to validate your vote.