The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to provide basic information about the escheatment process for investment accounts.
What is Escheatment?
The term escheatment refers to the process of turning custody of abandoned assets or accounts over to a state authority. Investment accounts that are held with a broker-dealer or investment adviser may be subject to escheatment under certain circumstances described below.
States generally require financial institutions to escheat, or turn over to the state, any investment accounts that have been “abandoned” for a specified number of years. All states also require financial institutions to attempt to notify an account holder before turning an abandoned account over to the state. The rules for determining when an account qualifies as “abandoned” and for what qualifies as an attempt to contact an account holder vary for each state. For more information on the escheatment rules that apply in your state you can check out the National Association of Unclaimed Property Administrator’s (NAUPA) website for links to each state’s rules for abandoned property.
What happens to the contents of escheated investment accounts?
States may hold securities or other assets in escheated investment accounts for a limited period of time. However, states will eventually liquidate these assets and keep the money from the sale. For information on how long a particular state may maintain escheated accounts, refer to NAUPA’s website for links to each state’s rules for abandoned property.
If your investment account is escheated, what can you do?
You must file a claim with the state that escheated your investment account to attempt to recover account assets. The rules for filing escheatment claims vary for each state, but you should be prepared to provide information that verifies your ownership of the investment account. Some states also have a time limit for making escheatment claims. Contact your state’s unclaimed property authority or an attorney for further advice on how to proceed with an escheatment claim. You can find contact information for each state’s unclaimed property authority on NAUPA’s website.
If you make a successful escheatment claim, how much money will you get back?
STATES GENERALLY ONLY RETURN THE CASH VALUE OF YOUR INVESTMENT ACCOUNT ON THE DATE OF ITS ESCHEATMENT. THIS AMOUNT WILL NOT INCLUDE ANY DIVIDENDS OR INTEREST THAT ACCRUED AFTER THE ACCOUNT’S ESCHEATMENT. For more information on how much money you may recover from an escheatment claim, check out NAUPA’s website for links to each state’s rules for abandoned property.
How can you prevent escheatment of your investment account?
Financial institutions may only escheat an “abandoned” account. To avoid your account being deemed abandoned, consider taking the following actions:
Actively engage with your account. For example, one way to actively engage is to stay in contact with your investment professional or firm by periodically logging into your account or calling your investment firm representative to ask about your account. Depending on your state’s laws, other ways to avoid an account being abandoned are to deposit and withdraw money or execute trades.
Keep your contact information updated. Financial institutions must attempt to notify you before escheating your account. Make sure financial institutions at which you have accounts have your accurate contact information (telephone, e-mail and physical address) to help ensure you receive any notices related to your accounts. If your financial institution sends you mail that is returned as undeliverable, or it cannot reach you through your other contact information, your account may be declared abandoned and end up in escheatment.
Vote the proxy for any holding in your account. Any company you own stock in will generally provide you with annual proxy information. This proxy information lets you know when and where a shareholders’ meeting will occur and the matters that will be voted on at the meeting. If you choose not to attend the meeting in person, you can cast a vote for the matters being presented at the meeting by filling out a proxy. Voting your proxy demonstrates active ownership of the stock in your investment account and normally allows your financial institution to confirm that you have not abandoned your account.
Cash your dividend checks. If you have dividend-generating investments in your account that send you checks, make sure you cash the checks. Failure to cash these checks, especially if your financial institution attempts to contact you about the uncashed checks and cannot reach you, may result in your account being deemed abandoned.
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