AST Business Cycle Momentum Series
A GUIDE TO UNCLAIMED PROPERTY &
ESCHEATMENT
3
CONTENTS
INTRODUCTION...... 4 About Unclaimed Property...... 4
THE BASICS...... 6 Compliance Programs...... 7 Voluntary Programs...... 7
THE ESCHEATMENT PROCESS...... 8 Compliance Programs...... 8 Roles And Responsibilities...... 9 Unclaimed Matrix...... 12 Voluntary Programs...... 16 What Shareholders Can Do To Prevent Escheament...... 17 Special Scenarios That Require Unique Handling...... 17
FREQUENTLY ASKED QUESTIONS...... 20 Client-Related Questions ...... 21 Typical Shareholder Questions ...... 23
GLOSSARY...... 26
EXTERNAL RESOURCES...... 28 INTRODUCTION A Guide To Unclaimed Property & Escheatment 5 The process of reporting dormant accounts over of reportingThe process accounts over dormant escheatment. as is known to the state seek additional the states aggressively Today their dormancy lowering by sources of revenue of the states have majority periods. The vast shortened dormancy period their respective that abandoned It’s no surprise to three years. propertythree has emerged as one of the top states, including most sources for revenue which has the eighth-largest economy California, worldwide. generate As states are increasingly pressured to mechanism has this capital-raising revenue, on a new appeal. Under the Uniform taken to reportUnclaimed Property the the failure Act, in steep results efforts of asset recovery findings penalties. at a rate of accumulate example, penalties can For 1% of the property each month the property value is reported roles, states’ more aggressive late. The activism along with unprecedented shareholder importance demonstrates a renewed and scrutiny, record investor maintaining the most active for of attention the increasing levels possible. Given help can to the escheatment process, AST and protection against comfort warmth, provide unnecessarily escheating assets. programs that can further complement your further that can programs your complement strategic objectives. specific company’s (also escheatment mandatory core years, recent In as abandoned property) known programs have The reuniting of shareholders significantly. evolved checks,assets — uncashed with their personal the states’ etc. — versus corporate securities, this property position in claiming more aggressive voluntary an expansion of proactive, has driven initiate. can activities that issuers these partner to perform When we with you as operations, you mandatory and voluntary your asset maintenance for the issuer, simplify As a result, this process often shareholders. loyalty. helps build incredible shareholder agents performed a time when transfer There was tasks on behalf of issuers minimal asset recovery the mandatory SEC beyond that rarely went searches, associated due diligence mailings and the inevitable property escheatment in the a On occasion, of each year. spring and fall implement public company might ask its agent to a more detailed search program, commonly to as a deep search program, to target referred not responded to who have lost shareholders mandatory SEC searches. to seven- held five- states typically Not long ago, periods. A dormancy period is dormancy year has years a shareholder as the number of defined a state classifies a required action before to take a dividend the account as dormant, e.g., cashing their check, exchanging shares or notifying agent of a change in address. transfer have complied with your responsibility responsibility complied with your have UNCLAIMED PROPERTY UT O An overview of our strategic partnersAn overview questions and helpful asked Lists of frequently external resources A glossary of commonly-used unclaimed property terms to locate abandoned shareholders. We are also We abandoned shareholders. to locate supplemental search select to help you available • • • As your transfer agent, we are committed to the strongest disciplines of regulatory providing Our primary and risk management control. maintain responsibility is to ensure that you abandoned compliance with all applicable of shareholders your property regulations for record. administer the As normal course of business, we numerous state unclaimed property reports that you prove AB as an erence f T S A ed property. p re to aim t is our responsibility to look t is our responsibility l find: l importance of escheatment. cational guide and desk vering escheatment and uncl ithin this guide, you wi An overview of supplemental voluntary An overview your help retain equity for programs that can shareholders to assist you Management resources available unclaimed company’s of your in the oversight or abandoned property program A discussion of the rationale, processing components and expected results of each phase to handle third-party regarding how Guidelines audits and “what if” penalties An explanation of the regulatory requirements mandatory escheatment programs that drive
his guide has been developed by n the process of growth and development, of growth and development, n the process o du
e • • • • c W • T I of our building blocks to we must not allow any be left behind. I leads us to discuss after the abandoned, which the INTRODUCTION
INTRODUCTION A Guide To Unclaimed Property & Escheatment & Property Unclaimed To Guide A 4 THE BASICS A Guide To Unclaimed Property & Escheatment 7 The following programs are supplemental and precede initial and annual compliance cycles. programs are supplemental The following CLEANUP POST-MERGER date of the after the effective six months cleanup occurs post merger (approximately Post-merger not exchanged their shares to participate in who have owners transaction) and encourages rightful corporate actions. SEARCH DEEP lost in the whose accounts are marked shareholders Deep search is a process designed to locate already met or are not subject to SEC 17Ad-17 requirements. services system and have shareowner to help ensure a smooth journey through these sometimes the tools have we agent, As your greater detail throughout the following processes. Each component will be discussed in complicated sections. COMPLIANCE PROGRAMS COMPLIANCE INITIAL COMPLIANCE all reportableThis phase identifies unclaimed property of state reportingfulfillment and the and propertybe remittedyou (the issuer) have to to the time the first remittance assets. It is performed of event (e.g. reorganization). an M&A following first time This includes the issue. states on a specific is not agent, initial compliance to a new transfer It is important move to note that should an issuer for each eligible event periods altered. This is a one-time filing or nor are the dormancy and/ affected, company issue. COMPLIANCE ANNUAL including the escheatable property, to identify is performed This occurs on an annual basis. A review of all state reportingcompilation and filing corresponding asset remittance. requirements and Every 1, or during by November dates to which issuers are expected to comply – either state has annual filing 1. March 1 and May the period between SEARCHES SEC MANDATED attempts two to locate must make agent the transfer In accordance with SEC regulation 17Ad-17, as lost when correspondence sent to the are classified as lost. Shareholders classified shareholders (RPO), decedent accounts, corporate as undeliverable the post office address of record is returned by the SEC mandated for under $25 do not qualify value aggregate with an accounts and accounts, will be a period of six months for checks and checks which are not cashed search. Uncashed this mandatory search. required for PROGRAMS VOLUNTARY Remitting property to the proper state Maintaining records of property remitted • • Guam, All 50 states, the district of Columbia, Islands have Virgin Puerto U.S. Rico and the which of the Act, versions enacted their own Act. degrees of The Uniform different follow territory requires all legal state and U.S. Every entities, including corporations, partnerships, its to follow and C corporations, LLC’s this abandoned property Typically regulations. if the entity has no unclaimed applies even are subsidiaries foreign Generally, property. abandoned property laws; not subject to U.S. of foreign-owned domestic subsidiaries however, be subject to the laws. may firms The administration of unclaimed property is – primary classifications into two down broken – which are made up compliance and voluntary of a series of underlying programs as described page. on the following n Uniform State Laws, an Filing reports with the proper states Attempting to notify the shareholder (due Attempting the shareholder to notify diligence) f Commissioners o
With growth and development comes the the comes and development growth With entities to with other of working responsibility standards. best practices and maintain high develop to taking great care to are dedicated we At AST, compliance with state company’s full ensure your unclaimed property and escheatment laws. • organization focused on consumer protections organization focused property. individual and safeguarding agent that will Issuers must engage a transfer four primary regulatory responsibilities, fulfill state regulations, including: based on various • Unclaimed property refers to the collective to the collective Unclaimed property refers activities of mandatory escheatment and programs. United States supplemental voluntary property state laws, rights are regulated by what Each state defines laws. rather than federal property reportable, is considered when it is reportable that (the dormancy period) and how property must be reported. innumerable to unify In 1954, in an effort abandoned state statutes clearly define and Disposition Of property The Uniform ownership, Unclaimed Property introduced was (the Act) Act Act is based on in 1981 and 1995. The and ratified expert contributions of the National Conference o THE BASICS THE
THE BASICS THE A Guide To Unclaimed Property & Escheatment & Property Unclaimed To Guide A 6 THE ESCHEATMENT PROCESS A Guide To Unclaimed Property & Escheatment 9 lings, decedent database and fi ty movement Ensures property the states as required and proper state-required is escheated to reports on time are filed regulations Monitors changes to state reportsProvides on unclaimed propertyto issuer (client) within an compliance completion) agreed upon date (post of the asset Ultimate owner to agent when there is either an address change or modifications transfer Notifies registration six months to ensure accuracy reviews his account online every Ideally, A non-profit organization affiliated with the national Association of state treasurers A non-profit organization affiliated Promotes and supports excellence and and the council of state governments. with the responsibilities of charged among those individuals professionalism unclaimed property administration and compliance. regulators, providing representation to its members in dialogue with Provides members on regulations that will impact their for and education information exchanges of data between effective allowing business, and establishing guidelines with other industry groups, agents and other industry participants. Works transfer FINRA and NYSE/Euronext. Company, including The Depository Trust for shareholder meeting their responsibilities Supports issuers in effectively corporate engages in and actively industry education and service.recordkeeping Provides issuers and their shareholders. dialogue with regulatory entities on matters which affect vehicle/forum as a Serves Promotes and supports within asset recovery. efficiencies and thought leadership. communication for a to perform states, enabling owners the A national database, sponsored by to the states and been turned over lost assets that have search for comprehensive provinces. • • • • • • cleanup Post-merger State reporting and remittance programs, escheatment Mandatory and voluntary deep search, reporting and proper Pursues abandoned property as revenue and establishes guidelines for when Pursues abandoned property for and establishes guidelines as revenue property is escheatable state abandoned propertycompliance with all applicable Required to maintain laws INK Shareholder L Services INDUSTRY ADVISORS AND PROFESSIONAL ASSOCIATIONS ADVISORS INDUSTRY National Association Of Unclaimed Property Administrators (NAUPA) Securities Transfer Association, Inc (STA) ServicesShareholder Association (SSA) Unclaimed Property Professionals Organization (UPPO) Missingmoney.com Shareholder servicesfor specific detailed below) as third party serve (these firms vendors PARTNERS STRATEGIC Conduent Keane ROLES AND RESPONSIBILITIES ROLES The State(s) Issuer agent Transfer Setting of issuer’s the baseline threshold permits that compliance status to a level automatic and regular state unclaimed property reporting Identifying reportableIdentifying property per the each state dormancy period for Processing of due diligence in accordance with each state’s requirements Organizing of property in acceptable formats each state for Remitting of property and reporting to each state Eliminating or substantially reducing liability past due property for The transfer agent may obtain applicable release obtain applicable agent may The transfer from agents of agreements and indemnification strategies to jurisdictions and provide the various exposure to interest and penalties. minimize your theOnce initial compliance is implemented, requirements are met: following • • • • • •
given no instruction red over to the state d your shareholders. porting property to a claim against escheatable property. nto compliance in all jurisdictions that i
MPLIANCE PROGRAMS mpany-issued checks and abandoned stock. mpany-issued checks and abandoned cheated assets are transfer cheatment is the act of re r a time period meeting the dormancy of r a time period meeting the dormancy r safekeeping until the rightful owner makes a hich the rightful owner has made no claim, hich the rightful owner has made no claim, O s s
his initial phase identifies first-time reportable laim on the assets. At AST, our goal is to keep o ach state. Property that would qualify for ach state. Property that would qualify ngaged in no transaction or o o
he escheatment process includes uncashed he escheatment process includes uncashed Initial Compliance T unclaimed property and may also reduce liability for past due property. This program brings issuers may have C f e t c E f c you safe and protect you an E e w Part includes operations procedure of a superior regulations in order to managing complicated unnecessary and avoid comply with the law partner, to protect you wants penalties. As your AST the escheatment navigate you and help ensure that process with ease. THE ESCHEATMENT ESCHEATMENT THE PROCESS
THE ESCHEATMENT PROCESS ESCHEATMENT THE A Guide To Unclaimed Property & Escheatment & Property Unclaimed To Guide A 8 10 11 THE BASICS THE BASICS THE A Guide To & Escheatment Unclaimed Property
ANNUAL COMPLIANCE It is important to note that the states recognized ESCHEATMENT ANNUAL COMPLIANCE TIMELINE This program is implemented to help ensure that there were expenses associated with Based on the below dormancy, the graphic below represents a typical timeline for annual compliance through an annual review of initiating annual compliance (e.g. materials and compliance. property that has become escheatable since the postage for a due diligence mailing), and in prior year’s report. As your transfer agent, we turn established minimum dollar values for the JAN FEB MAR APR M AY JUN JUL AUG SEPT OCT NOV DEC property. If the value of the property eligible for conduct diligence efforts to notify shareholders Due Due of upcoming escheatable property and file the escheatment falls below the threshold, no due diligence diligence mailed mailed diligence is required. Fall necessary reports to each state. Spring filing
A Guide To Unclaimed Property & Escheatment To A Guide filing Once implemented, the following requirements Annual compliance/escheatment reporting are met: is based on the individual state’s dormancy period(s), defined in the following matrix. AST will Shareholders Shareholders Identification of reportable property per the respond to respond to • ensure your compliance with state escheatment dormancy period for each state mailing mailing laws, allowing you to protect your company • Providing preliminary escheat reports (by while sheltering your shareholders from steep RESULTS OF THE ESCHEATMENT PROCESS state) to the issuer prior to the due diligence non-compliance penalties. Ongoing contact throughout the year removes shareholders from escheatment processing. mailing(s), which may include multiple filings Lost shareholder searches are conducted. • Processing of due diligence in accordance Property is processed with state agencies. with state agents Reporting is balanced and validated. • Organization of property in acceptable formats for each state • Remittance of property and reporting to each state • Adherence to changing regulations and subsequent processing updates
Each state has its own unique requirements with respect to when dormant property should be escheated and criteria for due diligence eligibility prior to escheatment. 12 13 AST ESCHEATMENT MATRIX AST ESCHEATMENT MATRIX
Delaware 31-Dec DelawareNot Applicable 31-Dec Not Applicable Delaware 31-Dec Not Applicable
New York 31-Dec Not lessNew than York 90 days prior to report31-Dec deadline Not less than 90 days prior to report deadline New York 31-Dec Not less than 90 days prior to report deadline
AST ESCHEATMENT MATRIX ESCHEATMENT AST Within 180 days and one year before the Within 180 days and one year before the Within 180 days and one year before the A Guide To & Escheatment Unclaimed Property Connecticut 31-Dec presumptionConnecticut of abandonment takes31-Dec effect presumption of abandonment takes effect Connecticut 31-Dec presumption of abandonment takes effect
Not Applicable Not Applicable Not Applicable Pennsylvania 31-Dec Pennsylvania 31-Dec Pennsylvania 31-Dec Not more than 120 days and not less than 60 Not more than 120 days and not less than 60 Not more than 120 days and not less than 60 Florida 31-Dec days priorFlorida to the reporting due date 31-Decof April 30 days prior to the reporting due date of April 30 Florida 31-Dec days prior to the reporting due date of April 30
Illinois 31-Dec 60 toIllinois 120 days prior to report deadline31-Dec 60 to 120 days prior to report deadline Illinois 31-Dec 60 to 120 days prior to report deadline
Tennessee 31-Dec 60 toTennessee 120 days prior to report deadline31-Dec 60 to 120 days prior to report deadline Tennessee 31-Dec 60 to 120 days prior to report deadline
Vermont 31-Dec 60 toVermont 120 days prior to report deadline31-Dec 60 to 120 days prior to report deadline Vermont 31-Dec 60 to 120 days prior to report deadline
Michigan 31-Mar 60 toMichigan 365 days prior to report deadline31-Mar 60 to 365 days prior to report deadline Michigan 31-Mar 60 to 365 days prior to report deadline
Texas 1-Mar Not lessTexas than 60 days prior to report1-Mar deadline Not less than 60 days prior to report deadline Texas 1-Mar Not less than 60 days prior to report deadline "6/30 or holder's Six months to one year before "6/30Notice or Report holder's Six months to one year before Notice Report "6/30 or holder's Six months to one year before Notice Report California California California fiscal year end." deadline. fiscal year end." deadline. fiscal year end." deadline. Arizona 30-Jun PriorArizona to 120 days before filing the30-Jun report Prior to 120 days before filing the report Arizona 30-Jun Prior to 120 days before filing the report A Guide To Unclaimed Property & Escheatment To A Guide Washington 30-Jun AfterWashington May 1st but before August30-Jun 1st After May 1st but before August 1st Washington 30-Jun After May 1st but before August 1st Alabama 30-Jun 60 toAlabama 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Alabama 30-Jun 60 to 120 days prior to report deadline Alaska 30-Jun No moreAlaska than 120 days prior to report30-Jun deadline No more than 120 days prior to report deadline Alaska 30-Jun No more than 120 days prior to report deadline Arkansas 30-Jun 60 toArkansas 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Arkansas 30-Jun 60 to 120 days prior to report deadline Colorado 30-Jun Not moreColorado than 120 days before report30-Jun deadline Not more than 120 days before report deadline Colorado 30-Jun Not more than 120 days before report deadline District of District of District of 30-Jun 60 to 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline 30-Jun 60 to 120 days prior to report deadline Columbia Columbia Columbia Georgia 30-Jun 60 toGeorgia 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Georgia 30-Jun 60 to 120 days prior to report deadline Hawaii 30-Jun No moreHawaii than six months prior to report30-Jun deadline No more than six months prior to report deadline Hawaii 30-Jun No more than six months prior to report deadline Idaho 30-Jun Not moreIdaho than 120 days before report30-Jun deadline Not more than 120 days before report deadline Idaho 30-Jun Not more than 120 days before report deadline Indiana 30-Jun 60 toIndiana 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Indiana 30-Jun 60 to 120 days prior to report deadline Iowa 30-Jun IowaOn or before August 31st30-Jun On or before August 31st Iowa 30-Jun On or before August 31st Kansas 30-Jun 60 toKansas 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Kansas 30-Jun 60 to 120 days prior to report deadline Kentucky 30-Jun 60 toKentucky 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Kentucky 30-Jun 60 to 120 days prior to report deadline Louisiana 30-Jun 60 toLouisiana 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Louisiana 30-Jun 60 to 120 days prior to report deadline Maine 30-Jun 60 toMaine 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Maine 30-Jun 60 to 120 days prior to report deadline
14 15 AST ESCHEATMENT MATRIX AST ESCHEATMENT MATRIX
Maryland 30-Jun 30 toMaryland 120 days prior to report deadline30-Jun 30 to 120 days prior to report deadline Maryland 30-Jun 30 to 120 days prior to report deadline Massachusetts 30-Jun At leastMassachusetts 60 days prior to report deadline30-Jun At least 60 days prior to report deadline Massachusetts 30-Jun At least 60 days prior to report deadline AST ESCHEATMENT MATRIX ESCHEATMENT AST
Not more than 120 days prior to the report Not more than 120 days prior to the report Not more than 120 days prior to the report A Guide To & Escheatment Unclaimed Property Minnesota 30-Jun Minnesota 30-Jun Minnesota 30-Jun deadline deadline deadline Mississippi 30-Jun MississippiBefore report deadlne 30-Jun Before report deadlne Mississippi 30-Jun Before report deadlne Missouri 30-Jun WithinMissouri one year of report deadline30-Jun Within one year of report deadline Missouri 30-Jun Within one year of report deadline Montana 30-Jun 60 toMontana 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Montana 30-Jun 60 to 120 days prior to report deadline Nebraska 30-Jun 60 toNebraska 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Nebraska 30-Jun 60 to 120 days prior to report deadline Nevada 30-Jun 60 toNevada 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Nevada 30-Jun 60 to 120 days prior to report deadline Not more than 120 days before report deadline Not more than 120 days before report deadline Not more than 120 days before report deadline New Hampshire 30-Jun New Hampshire 30-Jun New Hampshire 30-Jun nor less than 60 days nor less than 60 days nor less than 60 days New Jersey 30-Jun 60 toNew 120 Jersey days prior to report deadline30-Jun 60 to 120 days prior to report deadline New Jersey 30-Jun 60 to 120 days prior to report deadline New Mexico 30-Jun 60 toNew 120 Mexico days prior to report deadline30-Jun 60 to 120 days prior to report deadline New Mexico 30-Jun 60 to 120 days prior to report deadline North Carolina 30-Jun 60 toNorth 120 Carolinadays prior to report deadline30-Jun 60 to 120 days prior to report deadline North Carolina 30-Jun 60 to 120 days prior to report deadline A Guide To Unclaimed Property & Escheatment To A Guide North Dakota 30-Jun Not moreNorth than Dakota 120 days before report30-Jun deadline Not more than 120 days before report deadline North Dakota 30-Jun Not more than 120 days before report deadline Ohio 30-Jun At leastOhio 30 days prior to the report 30-Jundeadline At least 30 days prior to the report deadline Ohio 30-Jun At least 30 days prior to the report deadline Oklahoma 30-Jun Not moreOklahoma than 120 days before report30-Jun deadline Not more than 120 days before report deadline Oklahoma 30-Jun Not more than 120 days before report deadline Oregon 30-Jun Not lessOregon than 60 days prior to report30-Jun deadline Not less than 60 days prior to report deadline Oregon 30-Jun Not less than 60 days prior to report deadline Puerto Rico 30-Jun Puerto RicoNot Applicable 30-Jun Not Applicable Puerto Rico 30-Jun Not Applicable Rhode Island 30-Jun Not moreRhode than 120 Island days before report30-Jun deadline Not more than 120 days before report deadline Rhode Island 30-Jun Not more than 120 days before report deadline South Carolina 30-Jun Not moreSouth than Carolina120 days before report30-Jun deadline Not more than 120 days before report deadline South Carolina 30-Jun Not more than 120 days before report deadline South Dakota 30-Jun SouthBefore Dakota report deadlne 30-Jun Before report deadlne South Dakota 30-Jun Before report deadlne Utah 30-Jun Not moreUtah than 120 days before report30-Jun deadline Not more than 120 days before report deadline Utah 30-Jun Not more than 120 days before report deadline Not more than 120 but less than 60 days prior to Not more than 120 but less than 60 days prior to Not more than 120 but less than 60 days prior to Virgin Islands 30-Jun Virgin Islands 30-Jun Virgin Islands 30-Jun the reporting deadline the reporting deadline the reporting deadline Virginia 30-Jun 60 toVirginia 120 days prior to report deadline30-Jun 60 to 120 days prior to report deadline Virginia 30-Jun 60 to 120 days prior to report deadline West Virginia 30-Jun 60 toWest 120 Virginia days prior to report deadline30-Jun 60 to 120 days prior to report deadline West Virginia 30-Jun 60 to 120 days prior to report deadline Wisconsin 30-Jun Not moreWisconsin than 120 days before report30-Jun deadline Not more than 120 days before report deadline Wisconsin 30-Jun Not more than 120 days before report deadline Wyoming 30-Jun Not moreWyoming than 120 days before report30-Jun deadline Not more than 120 days before report deadline Wyoming 30-Jun Not more than 120 days before report deadline
16 17 VOLUNTARY PROGRAMS VOLUNTARY PROGRAMS Shareholder-paid fees range from 10% to Notable state specifics. The most noticeable difference among the states is the unique dormancy periods 30% and are based on account status (living, and specific due diligence requirements related to the transfer of property, for example: deceased, etc.) DEEP SEARCH • New York, New Jersey and Ohio have certified due diligence mailing requirements. California requires a pre-escheatment file seven months prior to remitting property. Deep search is a process designed to locate Deep search is implemented because it: • shareholders whose accounts have been • Lowers fees and provides shareholders with This program is implemented because it: Ultimately, as the issuer, it is highly unresponsive or are not subject to SEC searches. full disclosure recommended that you work with the agent to This voluntary program gives shareholders the • Drastically reduces the amount of shareholder VOLUNTARY PROGRAMS VOLUNTARY • Supports fraud prevention efforts help ensure proper communication/education A Guide To & Escheatment Unclaimed Property option of using the services of a third party to property needlessly escheated to state is made available to shareholders. Ideally, help recover assets and prevent escheatment. • Reduces the number of lost shareholders, and treasuries shareholders are accustomed to notifying If the account is associated with a known lost therefore, assets escheated to the states Allows highly-receptive shareholders the • the transfer agent when they move and have decedent account, we will reach out to heirs. option of an issuer’s governance of this • Helps refresh correct, accurate shareholder solid estate provisions in place (e.g. wills, data files function The deep search vendor will identify executorships, etc.) That clearly designate heirs shareholders who cannot be located using • Results in a higher and more efficient and assets. POST-MERGER CLEAN UP traditional methods. The process is initiated participation rate for the M&A event only after an account has been unresponsive This component involves a review of a • Provides contact for all unexchanged SPECIAL SCENARIOS THAT REQUIRE to mandated SEC search efforts. When corporate action event in order to identify lost or shareholders UNIQUE HANDLING shareholders are located, they must contractually unexchanged shareholders. Investors are offered • Replaces or exchanges certificates lost by agree to have their assets recovered by the assistance in the exchange of their shares. Escheatment services and other voluntary unexchanged shareholders vendor on their behalf. The ultimate goal is to maximize shareholder unclaimed property programs have unique participation. • Shortens the M&A event duration, saving and special requirements based on individual A Guide To Unclaimed Property & Escheatment To A Guide In all letters and communications with the additional annual administration fees state laws and rules that preside over them. shareholders, the assets are disclosed. Using The post-merger cleanup (provided by LINK • Incurs no additional cost since fees are The items below are some of the more typical third parties, shareholders will be given the Shareholder Services) is a voluntary service that shareholder-paid (with their consent) special scenarios that require unique handling. option to have their certificates replaced or have helps reunite shareholders and their heirs with If you have questions regarding a scenario not their shares liquidated. merger entitlements. There is no cost to the discussed here, please contact your relationship WHAT SHAREHOLDERS CAN DO TO issuer and the program is typically employed six PREVENT ESCHEATMENT manager. For shareholders choosing to use this program, months following the effective date. the vendor will provide a letter of instruction The most effective preventative measure Dormant account owners. Many dormant account to Shareowner Services for any registration shareholders can take to avoid escheatment CERTIFICATED SHARES owners are unaware of ownership because of previous changes. This includes obtaining the required of their property is to notify the transfer agent corporate reorganization, unknown inheritance or For initial escheatment. Certificated shares held legal documents and a copy of the signed confusion. On average, 50% of shareholders claim of any change to their mailing address or pending an exchange or corporate action are shareholder contract. they have either lost or have no recollection of ever registration. Decedent-related escheatment is a processed and handled in the same manner, receiving their original certificates. They find the typical example, as oftentimes heirs are unaware within the same time frames, and in accordance While our deep search program is administered replacement process intimidating and burdensome of the decedent’s assets. with the same individual state requirements as through our preferred strategic partners, we are and the instructions overwhelming. Collectively these book-entry shares. positioned to work with an alternate provider of a factors often create a shareholders inability to act. The most challenging scenario is for a client’s choice. non-dividend paying issuer because there are For annual escheatment. Certificated shares held no cash distributions or dividend reinvestment by shareholders are processed and handled in shares to buy or sell. Another challenging the same manner, within the same time frames, scenario occurs when an issuer utilizes a third and in accordance with the same individual state party for proxy services. It is incumbent on the requirements as book-entry shares. issuer to obtain the voting records from the third party so the agent can update the records for contact. 18 19 VOLUNTARY PROGRAMS
FRACTIONAL SHARES relationship manager for proper handling and no indicator that the investor’s address is not database in accordance with SEC regulations.
For initial escheatment. Fractional shares that resolution. valid. However, the shareholder has not taken a Once new addresses are verified, a mailing is would otherwise be issued from an exchange required action in their account. sent encouraging the shareholder to update his/ As the transfer agent, we will review the or corporate action are typically paid out in the her account information. account(s) in question to research the particulars The attempt is made to contact all shareholders form of a check as cash-in-lieu (CIL). of the escheatment. If the shareholder’s claim with potentially-eligible property for escheatment. ADDRESSING AUDITS For annual escheatment. Fractional shares held is correct, we will facilitate contact with the In accordance with each jurisdiction’s statute, a by shareholders are processed and handled in state to coordinate the reimbursement of the States have become increasingly aggressive in VOLUNTARY PROGRAMS VOLUNTARY notice is sent to shareholders with escheatable A Guide To & Escheatment Unclaimed Property the same manner, within the same time frames, shareholder’s property. escheatment enforcement. Auditors may profile property. This notice informs the shareholder that and in accordance with the same individual specific industries and, if appropriate reporting the funds/ shares are subject to escheatment, requirements as full shares. and record keeping is not available, can issue FOREIGN SHAREHOLDERS and requests that they update/confirm their assessments higher than a company’s legitimate Foreign shareholders are processed and handled address on record. Upon the shareholder’s liability. Some states utilize third-party collection DIVIDEND REINVESTMENT SHARES in the same manner, within the same time frames contact, we replace checks for all outstanding agents to audit your transfer agent for unreported and in accordance with the same individual as dividends and reissue any certificates or For initial escheatment. Dividend reinvestment escheatable property. statements previously returned as undeliverable. shares held pending an exchange or corporate domestic shareholders. Rather than escheating property to the shareholder’s country of In the event you receive an audit notification, actions are reported within the same time frames If a new address is obtained, a verification residence, all property is typically remitted to the immediately contact the transfer agent via your and in accordance with the same individual mailing is sent to the new address. When contact issuer’s state of incorporation. relationship manager. state requirements as non-dividend reinvestment is received from a shareholder, their address shares. is updated and outstanding property for the As an issuer, the best defense to prevent an audit UNEXCHANGED OLD ISSUES account’s unclaimed property is released. For annual escheatment. Dividend reinvestment is to work closely with your relationship manager A Guide To Unclaimed Property & Escheatment To A Guide shares held by shareholders are processed Unexchanged shares held pending an exchange and actively participate in your annual service within the same time frames and in accordance or corporate action are processed and handled SEC 17 AD-17 SEARCH MAILINGS review, which provides a retrospective of your with the same individual requirements as as part of your company’s initial compliance. company’s previous year’s escheatment activities In compliance with SEC Rule 17Ad-17, the non-dividend reinvestment shares. Several states and statistics. transfer agent is required to attempt to locate have aggressively targeted these shares for RETURN FROM THE POST OFFICE (RPOS) shareholders after one or more mailings to the remittance. ADDRESSING PENALTIES Within a shareholder’s account there are several shareholder address on record has been returned portions of an account that can be affected by as “undeliverable” by the U.S. Postal Service. Statutes of limitation typically do not apply ERRONEOUS CLAIMS an RPO, such as an advice, certificate, dividend to unclaimed property. In some cases, state Twice a year, we transmit a file containing a check, dividend reinvestment statement, proxy auditors have gone back several decades in an From time to time a shareholder may claim list of accounts with bad addresses to our card or correspondence. These items are coded attempt to identify non-compliance with the his/her shares were mistakenly escheated. information agent. These are accounts that had as RPO (a “bad address” is on file) and as such, unclaimed property law. These claims are dealt with in a sensitive and items returned by the U.S. post office or were responsive manner. As the issuer, the claim the shareholder is excluded from future mailings. converted to our files with a known bad address Under the Uniform Unclaimed Property Act, should be logged in accordance with your by the prior agent. The file is run against a the failure to report the results of unclaimed standard protocols for other shareholder SHAREHOLDER DUE DILIGENCE MAILINGS property efforts results in steep penalties. As correspondence and delivered to your This mailing is performed prior to escheatment your agent, we make every effort to ensure that cycle. Recipients are identified because there is penalties are not incurred for the property we maintain on your behalf.
Important! On an annual basis, you should discuss regulatory changes (e.g. dormancy periods) with your relationship manager, as well as review your company’s previous year’s escheatment activity, which includes corporate action events. 20 21 FREQUENTLY ASKED QUESTIONS
CLIENT-RELATED QUESTIONS If I find an error or property that should not be included, how do I get that corrected prior to it What is my responsibility in the escheatment being escheated? process? Our escheatment process will automatically As the issuer, the states will ultimately hold your identify property that is eligible for escheatment company responsible for full compliance with based on each state regulation. If you identify any each respective escheatment law, as you are records on the preliminary escheatment report considered the holder of the property. you deem to be inaccurate, you should advise FREQUENTLY the shareholder to take action on his/her account How do I best serve my company in this prior to the next escheatment cycle.
FREQUENTLY ASKED QUESTIONS ASKED FREQUENTLY required process? What can I do to assist my A Guide To & Escheatment Unclaimed Property transfer agent in these processes? ASKED Where is foreign held property escheated? An important and proactive step you can take is to Foreign shareholders’ property is typically periodically review the preliminary escheatment escheated to the state of your company’s report provided via your relationship manager QUESTIONS incorporation. (RM). A client may use this report to identify active employees and high-profile shareholders Is there a different process or timeline for with property subject to escheatment. For those & GLOSSARY foreign holders? shareholders, clients are encouraged to promote action to reconcile their account(s). A second No. The client will follow its state of valuable resource is the final escheatment report, incorporation’s escheatment requirements for which details (by shareholder) what property has both domestic and foreign shareholders. been escheated, the value and to which state(s). Is there a different process or timeline for A Guide To Unclaimed Property & Escheatment To A Guide unexchanged old issues? How do I know that my transfer agent is completing all the required processes? Yes. We typically utilize the services of a state-
Final escheatment reports, available via your approved agent. We interface directly with these RM, detail all property, its value and the state of agents to escheat the property to the respective escheatment. We also conduct internal audits as a state(s). Unexchanged shareholders’ property supplemental measure to ensure compliance with is typically required to be escheated three to each state regulation and SEC regulations. five years after the effective date of a given corporate action event depending on the state’s dormancy period. What in formation should I look for in the available reports? Are the call centers notified of shareholder due Review the preliminary escheatment reports at the diligence mailings? individual shareholder level to identify potentially- eligible escheatable property (employees, Yes. All call centers are provided with notification, insiders, etc.) The final escheatment report will including the volume and mail dates. detail the property, its value and the state of escheatment. Further, statistics related to due diligence efforts (e.g. shareholder responsiveness) are also available via your RM. 22 23 FREQUENTLY ASKED QUESTIONS
What are the transfer agent’s responsibilities to How long does it take before states receive the What are the transfer agent and issuer TYPICAL SHAREHOLDER QUESTIONS their clients with respect to undeliverable mail/ escheated asset? responsible for after property has been bad addresses? escheated? What is lost or abandoned property? The timing is based on when the abandoned We adhere to SEC 17Ad-17 regulations with property is due and varies by state. Please refer As your TA, we will provide any assistance Tangible or intangible property that is unclaimed respect to undeliverable addresses of record. to the matrix on pages 12-15 for more information. we can to shareholders who contact us after by its rightful owner or his/her heirs. Abandoned Refer to SEC mandated searches on page five for The due dates usually fall into two filing seasons — their property is escheated, including proof of property may include stocks and/or dividends more information. Spring (March through May) and Fall (November escheatment and supporting documentation. if checks are not cashed within the dormancy 1). Some states are also moving to a July timeline, period as prescribed by a state. What type of account is designed for an SEC making unclaimed property a year-round event. What is the retention time for these records? search? What happens to the other accounts? Each state has its own record retention policies, What does “escheat” mean? FREQUENTLY ASKED QUESTIONS ASKED FREQUENTLY A Guide To & Escheatment Unclaimed Property All living shareholder accounts for which we have Once the state(s) receive the property, how long which typically range from five to ten years. Escheatment is the transfer of property to a state, evidence of undeliverable correspondence are does it take them to post the unclaimed assets? making the state the legal owner of the asset. included in two separate searches, which are This varies for each state. Typically, shareholders Are there any requirements for proof of conducted six months apart. Accounts that do not can expect to search on their claim(s) in about ownership? A search vendor has contacted me regarding qualify for the SEC search may be submitted to a six weeks. In some cases, however, it may take When claiming property back from the state, a The assets in my account. Do I need to use this third-party search vendor for further research. longer. shareholder will generally be required to provide: vendor to recover my property?
No. You may contact the transfer agent directly to How do I know if there is a problem with a Who can I contact at AST with questions when 1. Photo identification (e.g. driver’s license) shareholder’s address? Is the account coded as recover assets. Search vendors may assist you in an issue arises? 2. Proof of a social security number such, and is the date of the application of the preparing specific legal documents to assist in the Your relationship manager will answer any specific code notated on the record? 3. Proof of current address recovery process, but you are under no obligation questions and assist in the resolution of any issue The records will notate those accounts returned to use them. you may have in the escheatment or SEC lost as undeliverable. Once flagged, these accounts Are there any requirements for proof of shareholder process. ownership?
A Guide To Unclaimed Property & Escheatment To A Guide are dated and suppressed from future mailings. How long will it take to receive my property A third party making a claim (e.g. an estate or heir) back from the state? Why are shares sold by the states after may be asked to provide: How can we tell when certificated shares were escheatment? States typically send out acknowledgment escheated? letters within one month after receiving a States may be required by their respective laws 1. Personal identification Accounts with certificates that have been claim. To ensure that all property is returned to sell securities within a specified time frame 2. Wills escheated are noted as such with a debit code of to the rightful owners, it typically takes 90 after receipt of the property and the time varies. 99 on our system. 3. Letters testamentary days or more for claims to be reviewed and Individual states should be contacted for this time verified. Claims involving estates generally take period. 4. Probate documents considerably longer. 5. Estate tax id number
6. Death certificate(s) How can I prevent my property from being turned over to the state? Shareholders may initiate claims on their own using missingmoney.com, a website administered 1. K eep accurate records of all accounts
by most states’ unclaimed agencies. From there 2. K eep accounts active by contacting the record they can initiate the claim, download required keepers of your property by mail, telephone or forms and/or contact the state directly. Internet
3. Cash all checks for dividends, wages, refunds and insurance settlements 24 25 FREQUENTLY ASKED QUESTIONS
4. Notif y a family member or trusted advisor of Who gave you permission to give away my What should I do if I hold unexchanged shares I am enrolled in the dividend reinvestment plan. the location of your records property? from another company and they are escheated? Why was my stock escheated?
5. Notify all concerned parties if you change All companies are required to report lost or To search for escheated property in your state, If you did not contact the transfer agent for a addresses abandoned property to each state and follow the visit www.unclaimed.org. period of years (e.g. a statement was returned respective escheatment laws that govern how lost or you didn’t respond to a due diligence Is there a time limit for claiming my property? or abandoned property is handled. Were my dividends forfeited? mailing), or there was no account activity (e.g. sale or purchase of shares, not including Most states do not enforce a time limit for Uncashed dividend checks are typically turned Why wasn’t I contacted be fore my property reinvestment of dividends), your stock account shareholders to file a claim. Generally most was escheated? over to the state as lost or abandoned property if was considered to be dormant. As such, jurisdictions sell escheated shares within a they are not cashed within a specified period of the property is then escheated to the state specific time (please refer to individual states for If you were not contacted, we had trouble locating FREQUENTLY ASKED QUESTIONS ASKED FREQUENTLY time as outlined in the state escheatment laws. according to its specific laws. A Guide To & Escheatment Unclaimed Property this information), resulting in a cash value for the you. We make every effort to notify shareholders claim. The unclaimed property account is held of impending escheatable property in their Do I have to pay to get my money back? Is dividend reinvestment considered contact? for the owner, or the owner’s heirs, until a claim accounts. Depending on the state that your property has is received and paid. It is important to note that been escheated to, you may have to pay a fee to No. Dividend reinvestment is not considered For lost shareholders, SEC notifications are shareholders will receive the value of their assets recover your assets. activity. Activity which is defined as a shareholder- generated. Supplemental programs, such as deep at the time of the sale (e.g. an M&A transaction) initiated transaction, including a purchase of searches and pre-escheat location (PEL) searches and will not receive market appreciation from the additional shares, sale of shares, proxy vote, etc. are conducted. Can I have my shares reinstated? point of the sale on. Only two states have time In accordance with each state’s abandoned limitations on when individuals can make claims If a shareholder is not coded as “lost,” the transfer How long will it take to have my property property regulations, the state may sell shares as on escheated property. Rightful owners have ten agent will perform due diligence mailings as returned to me? soon as immediately. In that case, you will recover years in Idaho, and 25 years in Indiana, to file a required by each state. the entitlements based on the market price on the Each state has specific guidelines on how claim before escheated property permanently day they were sold. If the state has not sold your escheated property is returned to its owner. becomes property of the state. How long does it take for property to be Shareholders must contact the state for this
A Guide To Unclaimed Property & Escheatment To A Guide shares, you may have the option to have your escheated? shares reinstated. information. Why did you give my property to the state Each state has its own escheatment laws considering that I haven’t moved in years? Many of these same questions are addressed on regarding abandoned property. Dormancy I still have my original stock certificates. What www.unclaimed.org as well as individual states’ Property may be escheated when either no periods range from three to five years. should I do with them? unclaimed property websites. account activity is generated or there has been For certificates that have been already escheated, no direct contact with the owner for a specified What should I do if a family member or I have you should keep the certificate, as some states period of time, as governed by the individual escheated shares? may require you to submit the certificate, or state’s escheatment law. Contact the unclaimed property division in your charge an additional lost security bond fee. state by visiting your state government’s website How can I find out if I have any escheated or by using the unclaimed property website, I still have my original dividend checks. What property? www.unclaimed.org. should I do with them? People can search for escheated property in their Keep a photocopy and destroy the original, which state at www.unclaimed.org. How do I make a claim to have my property no longer has any value. returned to me?
For instructions on how to make a claim, visit your state government’s local website or the unclaimed property website, www.unclaimed.org, which contains links to unclaimed property for each state. 26 27 GLOSSARY GLOSSARY GLOSSARY A Guide To & Escheatment Unclaimed Property
ABANDONED (UNCLAIMED) PROPERTY DORMANCY PERIOD The time period during INDEMNIFICATION An agreement that SEC SEARCH In accordance with SEC
Tangible or intangible property that is unclaimed which the owner of a property does not take protects a party from loss by transferring the regulation 17Ad-17, the transfer agent is required by its rightful owner or his/her heirs. Checks and action on his/her property. After this period of responsibilities to a third party. to look for qualified lost shareholder accounts, drafts may be unclaimed property if they are inactivity, the property is presumed abandoned which may include open checks. Qualified lost INTANGIBLE PERSONAL PROPERTY uncashed for the dormancy period prescribed by and must be reported and remitted to the shareholder accounts are required to go through Property that has no intrinsic value but is merely the applicable state. applicable state. two separate SEC searches in six-month intervals. representative or evidence of value. Examples DORMANCY DATE/DATE OF LAST include royalty payments, securities, accounts SHAREHOLDER The entity that is in possession ACTIVITY Action taken on property by the ACTIVITY The date of last contact by the owner receivables, gift items and deposit accounts. of, or controls, the property until it is transferred owner, which may include making a deposit, as evidenced by the records of the holder. to the state on behalf of the lost owner. a withdrawal, a written memorandum from the PRELIMINARY ESCHEATMENT REPORT A Guide To Unclaimed Property & Escheatment To A Guide account holder or any action that state statute DUE DILIGENCE In the unclaimed property A report that details which shareholders have SPRING REPORTING PERIOD This refers to deems adequate. Dividend reinvestment is not world, most states require that the holder escheatable property in their account. the process of escheating to those states with a considered activity. Activity is defined as a transfer agent make an attempt to contact the reporting deadline between March 1 and May 1. shareholder-initiated transaction, including a shareholder at his/her last known address in the PROPERTY TYPE The standard description of purchase of additional shares, sale of shares, etc. holder records prior to reporting and remitting the reported assets as designated by the state. STATE-APPROVED VENDOR Due to the property to the shareholder’s state of residence. complexities of the initial voluntary compliance AGGREGATE DUE DILIGENCE The threshold REPORTABLE PROPERTY Tangible or escheatment process, states will use the services dollar value used to determine if an individual ESCHEAT A transfer of property that makes the intangible property for which the required activity of a vendor that we, as the transfer agent, are holder’s account will require owner detail and due state the legal owner of the transferred property. has not occurred during the applicable state required to report through. diligence efforts. For example, if the aggregate is Today, in the unclaimed property industry, the prescribed dormancy period. $25, all individual accounts equal to or greater term escheat is used by many to mean that SUPPRESSED SHAREHOLDER ACCOUNT than $25 must be identified on the report and due property is delivered to the state as required by RIGHTFUL OWNER A person/entity who has This occurs when there has been evidence of diligence performed. applicable state unclaimed property statutes and the legal right to the property. correspondence sent to a shareholder account regulations. being returned by the post office as undeliverable. AGGREGATE REPORTING The standards used RPO (RETURNED FROM POST OFFICE) Also referred to as a lost shareholder. to determine what form of reporting to the state is FALL ANNUAL COMPLIANCE FILING Vendor payment checks, rebate or refund necessary. Some states do not require reports in PERIOD This refers to the process of escheating checks, payroll checks, dividend checks, stock a specific format if the property being reported is to those states with a reporting deadline of dividends, bond interest checks, securities under a certain value, typically $50. November 1. certificates or statements, etc., Which are returned as undeliverable by the post office because the CUSTODIAN An individual or entity that holds FINAL ESCHEATMENT REPORT A report that owner no longer resides at the address, the property until it is delivered to the rightful owner. details what property has been escheated over to address is unknown, no forwarding address Most states’ laws make the unclaimed property the states. provided, etc. division a custodian of the property remitted to the state. 28 29 EXTERNAL RESOURCES
SHAREHOLDER SERVICES UNCLAIMED PROPERTY PROFESSIONALS ASSOCIATION (SSA) ORGANIZATION (UPPO)
www.shareholderservices.org www.uppo.org The SSA provides members with a forum to Founded in 1992 at the annual conference of communicate with industry peers, obtain and the National Association of Unclaimed Property share information and address various needs Administrators, the UPPO is a complementary of member companies in servicing all types of association of corporate unclaimed property EXTERNAL RESOURCES A Guide To & Escheatment Unclaimed Property security holders. Its corporate and agent members administrators articulating the concerns of the EXTERNAL reflect the diversity found in every facet of the holders of unclaimed property and serving as securities industry. liaison with the states. UPPO is recognized by NAUPA and other entities involved in the RESOURCES areas of unclaimed property as the voice of the SECURITIES TRANSFER ASSOCIATION (STA) holder community.
www.stai.org MISSINGMONEY.COM STA is a national organization focused on servicing securities investors in the United States www.missingmoney.com and Canada. It provides representation and To enhance the state and province outreach leadership in issues of government regulation efforts to locate lost owners, missingmoney.com, and industry practices. The STA encourages and a national database, was established in November
A Guide To Unclaimed Property & Escheatment To A Guide promotes an exchange of information, experience, 1999 by the National Association of Unclaimed and ideas among association members. Property Administrators (NAUPA). It enables owners to perform comprehensive searches for It also fosters cooperation with similar industry lost assets required by law to be turned over to organizations to address common concerns. the states and provinces.
NATIONAL ASSOCIATION OF UNCLAIMED PROPERTY ADMINISTRATORS (NAUPA)
www.unclaimed.org NAUPA is a non-profit organization affiliated with the National Association of State Treasurers. Members represent all states and the District of Columbia. NAUPA provides a basic forum for continuing discussions on interstate cooperation, education, training, uniform laws, reporting requirements and increasing the public awareness of the role the states play in protecting their property. REACH OUT w astfinancial.com e [email protected] p 877.814.9687
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