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Unclaimed Property: Operational Impact & Best Practices

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Unclaimed property continues to be a regulatory and operational concern for financial services companies. Complex and constantly-changing legislation often makes compliance with state laws seem like hitting a moving target.

This 60-minute webinar will review current legislative and regulatory actions that impact the industry, including the new statutory requirements in Illinois. Additionally, our presenters will share best practices and tactical guidance on how to best comply with the regulations and ensure operational success.

Learning Objectives:
- Identify new legislation that impacts financial services companies.
- Understand the operational impact of unclaimed property compliance on both transfer agents and fund companies.
- Learn best practices and tactics to ensure compliance with state unclaimed property.

Published in: Economy & Finance
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Unclaimed Property: Operational Impact & Best Practices

  1. 1. www.nicsa.org | #WebinarWednesdays Unclaimed Property: Operational Impact & Best Practices Wednesday, March 21, 2018
  2. 2. www.nicsa.org | #WebinarWednesdays Today’s Presenters Debbie Zumoff Keane Kim Croston BNY Mellon Tara Altman Keane Dana Terry Georgeson LeeAnn Dionne DST Systems
  3. 3. www.nicsa.org | #WebinarWednesdays Compare & Contrast UT TN IL SB 175 HB 420 SB 9 Effective: 5/9/2017 Effective: 7/1/2017 Effective: 1/1/2018
  4. 4. www.nicsa.org | #WebinarWednesdays Compare & Contrast Subject UT SB 175 TN HB 420 Illinois SB 9 Securities Dormancy A security is presumed abandoned three years after: - the date a second consecutive communication sent by the holder by first- class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; or - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service. **Special outreach provision if owner does not communicate with holder via US mail but does so via electronic mail.) (67-4a- 206) A security is presumed abandoned three (3) years after: -the date a second consecutive communication sent by the holder by first- class United States mail to the apparent owner is returned to the holder undelivered by the United States postal service; or -lf the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States postal service. **Special outreach provision if owner does not communicate with holder via US mail but does so via electronic mail. (66-29- 111) A security is presumed abandoned upon the earlier of the following: - three (3) years after the date a communication sent by the holder by first- class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; however, if such returned communication is re-sent within one month to the apparent owner, the 3-year period does not begin to run until the day the resent item is returned as undeliverable; or - five (5) years after the date of the apparent owner's last indication of interest in the security. **Special outreach provision if owner does not communicate with holder via US mail but does so via electronic mail. ***Also a provisions for when an owner is deceased.) – reportable two (2) years after date of death (15-208) Securities Sale & Liquidation May sell or otherwise liquidate a security three (3) years after the administrator receives the security and gives the apparent owner notice that the administrator holds the security. (67-4a- 702(1)) Must sell or otherwise liquidate a security between eight (8) months and one (1) year, after receiving the security and giving the apparent owner notice that the treasurer holds the security. (66-29-142) May sell or otherwise liquidate a security three (3) years after the administrator receives the security and gives the apparent owner notice that the administrator holds the security. Section 15-503. (15-702(a))
  5. 5. www.nicsa.org | #WebinarWednesdays Compare & Contrast Subject UT SB 175 TN HB 420 Illinois SB 9 Tax Deferred Retirement Accounts Tax deferred retirement accounts presumed abandoned 3 years after the later of: - the date a second consecutive communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; or - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service. OR • The date the owner becomes 70.5 years of age • If deceased – 2 years after the holder receives confirmation of death. (67-4a-202) * Adds provision for electronic outreach for owners not receiving first class mail on at least an annual basis. Tax deferred retirement accounts presumed abandoned 3 years after the later of: - the date a second consecutive communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; or - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service. OR • The date the owner becomes 70.5 years of age • If deceased – 2 years after the holder receives confirmation of death. (66-29-106) * Adds provision for electronic outreach for owners not receiving first class mail on at least an annual basis. Tax deferred retirement accounts presumed abandoned 3 years after the later of: - the date a second consecutive communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; or - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service. OR • The date the owner becomes 70.5 years of age • If deceased –1 year after the date of mandatory distribution following death. (15-202) * Adds provision for electronic outreach for owners not receiving first class mail on at least an annual basis.
  6. 6. www.nicsa.org | #WebinarWednesdays Compare & Contrast Subject UT SB 175 TN HB 420 Illinois SB 9 Other Tax-Deferred Accounts Presumed abandoned 3 years after the earlier of: • The date specified in which distribution of the property must begin to avoid a tax penalty: or • 30 years after the date the account was opened. (67-4a-203) *Excludes 529A Plans Presumed abandoned 3 years after the earlier of: • The date specified in which distribution of the property must begin to avoid a tax penalty: or • 30 years after the date the account was opened. (66-29-107) * Excludes 529A Plans Presumed abandoned 3 years after the earlier of: • The date specified in which distribution of the property must begin to avoid a tax penalty: or • 30 years after the date the account was opened. If owner is deceased – 2 years from the earlier of: • The date of the distribution or attempted distribution of the property; • The date of the required distribution; • The date specified in which distribution of the property must begin in order to avoid a tax penalty. (15-203) • Does not exclude 529A Plans
  7. 7. www.nicsa.org | #WebinarWednesdays Compare & Contrast Subject UT SB 175 TN HB 420 Illinois SB 9 UTMA/UGMA Accounts Presumed abandoned 3 years after the later of: - the date a second consecutive communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service; Or • The date in which the custodian is required to transfer the property to the minor or the minor’s estate. (67-4a-204) • * Adds provision for electronic outreach for owners not receiving first class mail on at least an annual basis. Presumed abandoned 3 years after the later of: - the date a second consecutive communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service; Or • The date on which the minor reaches the statutory age of majority in accordance with title 35, chapter 7 (66-29-108) * Adds provision for electronic outreach for owners not receiving first class mail communications. Presumed abandoned 3 years after the later of: - the date a second consecutive communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; - if the second communication is made later than thirty (30) days after the first communication is returned, the date the first communication is returned undelivered to the holder by the United States Postal Service; Or • The date in which the custodian is required to transfer the property to the minor or the minor’s estate. (15-204) * Adds provision for electronic outreach for owners not receiving first class mail on at least an annual basis.
  8. 8. www.nicsa.org | #WebinarWednesdays Compare & Contrast UT SB 175 TN HB 420 IL SB 9 * Electronic Contact Permitted? Electronic contact by the owner to serve as an “indication of interest” which forestalls escheatment Section 67-4a-208(2)(a) Electronic contact by the owner to serve as an “indication of interest” which forestalls escheatment Section 66-29-113 (b)(1) Electronic contact by the owner to serve as an “indication of interest” which forestalls escheatment Sections 15-210 (b)(1) and 15-102 (26)
  9. 9. www.nicsa.org | #WebinarWednesdays Compare & Contrast UT SB 175 TN HB 420 Illinois SB 9 DD Text New notice header language required. (67-4a-502(1)) Must state that once turned over, the owner must file a claim with the Treasurer and property may be sold by the administrator. (67-4a-502(b) and (c)) New notice header language required. (66-29-129(a)) Must state that once turned over, the owner must file a claim with the Treasurer and property may be sold by the administrator. (66-29-129(b)(2) and (5)) New notice header language required. (15-502(a)) Must state that once turned over, the owner must file a claim with the Treasurer and property may be sold by the administrator. (15-502(b)(3) and (4)) DD Timeframe Not more than 180 days nor less than 60 days before filing report. (67-4a-501(1)) Not more than 180 days nor less than 60 days before filing report. (66-29-128 (b)) Not more than 1 year nor less than 60 days prior to filing the report. (15-501(a)) DD Mail Mode First class mail (67-4a-501(1)) First class mail (66-29-128 (b)(1)) First class mail except securities valued at or over $1000 must send letter notice via certified mail. (15- 501 (a)(c)) Electronic Due Diligence All three states require both e-delivery and First Class Mail when consent is present. UT – 67-4a-304 TN – 66-29-128(c) IL – 15-501(b)
  10. 10. www.nicsa.org | #WebinarWednesdays Compare & Contrast Subject UT SB 175 TN HB 420 Illinois SB 9 Foreign Addressed Property Substantially similar to Illinois (67- 4a-304) Substantially similar to Illinois (66- 29-119) May take custody of property presumed abandoned, whether located in this State, another state, or a foreign country…., and (1) another state or foreign country is not entitled to the property because there is no last-known address of the apparent owner or other person entitled to the property in the records of the holder; or (2) the state or foreign country of the last-known address of the apparent owner or other person entitled to the property does not provide for custodial taking of the property. (15-304)
  11. 11. www.nicsa.org | #WebinarWednesdays Enhanced Outreach Requirements • Email Communication • Pre-presumption: Illinois,Tennessee and Utah all require special outreach when a securities owner communicates with the holder electronically and not via US mail. • Due Diligence: All three states mandate both letter and email notice be sent if owner has consented to receiving communication via email. • Certified Mail: • Illinois Certified Mail required if value of securities is $1000 or more • Threshold and New Language: • North Carolina HB 294 – Signed into law on 7/20/17, Effective 10/1/17 • Reduces the due diligence threshold for securities to $25 • Requires specific language be placed into due diligence notice letters. • Civil penalty added for non-compliance with DD requirement.
  12. 12. www.nicsa.org | #WebinarWednesdays Other Miscellaneous Changes Arkansas • HB 1142 (effective 5/9/17): • Original version required securities sale prior to remittance. • Amended bill increased the securities dormancy period from five (5) to seven (7) years and eliminated the sale requirement. • HB 1752 (effective 7/31/17): amended DD timing to 180/90 days from 120/60 days Delaware • SB 13 – Effective 7/1/17 • Adds due diligence requirement • $50 threshold for all properties except securities • All amounts for securities Florida • Reg 44322 (effective 9/20/17): incorporates reporting manual into regulations which must be followed when reporting.
  13. 13. www.nicsa.org | #WebinarWednesdays Other Miscellaneous Changes Iowa • Reg 2716 (effective 1/1/18): now includes 529 plan accounts similar to RUUPA and more critically provides that state NOT obligated to indemnify holder if holder failed to comply with DD requirements. Ohio • OH 22096 2017 amended administrative rules to expand the definition of “Owner Generated Activity” • Online access via the Holder Website • If owner is deceased, activity by beneficiary or estate fiduciary is acceptable • Does not include non-return of mail, holder crediting dividends, account fees, etc. South Carolina • SC H 3720 prohibits the use of third-party contingent fee auditors, but it may join a multi-state contingent fee audit South Dakota • SB 34 (effective 9/1/17): requires state treasurer to sell all stocks, bonds, and other negotiable instruments within 90 days of confirmed receipt, unless the property is the subject of an open claim. • SB 45 (effective 7/1/18): • Requires state treasurer to sell all stocks, bonds, and other negotiable instruments within 180 days of confirmed receipt, unless the property is the subject of an open claim. • Allows the state 180 days to respond to a claim (increased from 90 days).
  14. 14. www.nicsa.org | #WebinarWednesdays RUUPA States
  15. 15. www.nicsa.org | #WebinarWednesdays Trends • Inclusion of broader property types • Electronic outreach • Life status as a driver • Increased fines, penalties and interest • Increased enforcement/audits • Decreased dormancy periods • Continued Litigation • States adopting RUUPA language adding RPO trigger
  16. 16. www.nicsa.org | #WebinarWednesdays Questions & Answers
  17. 17. www.nicsa.org | #WebinarWednesdays Contact Information Debbie Zumoff Keane 610.232.0704 dzumoff@KeaneUP.com Kim Croston BNY Mellon Asset Servicing 508.871.9222 kimberley.croston@bnymellon.com Tara Altman Keane 610.232.0772 taltman@KeaneUP.com Dana Terry Georgeson 201.539.1998 dterry@georgeson.com LeeAnn Dionne DST Systems, Inc. 617.483.8811 ldionne@dstsystems.com

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