Securities Unclaimed Property

Brian McCarthy
June 11, 2021

The securities industry continues to be an area of focus from an unclaimed property standpoint. Individual issuers and transfer agents are being targeted for audits.  The auditors are using traditional techniques to confirm that holders are in compliance with unclaimed property laws but they are also using nontraditional techniques to identify audit populations and shifting the burden of proof back to the individual issuers to rebut the presumption of abandonment. 

Securities Nontraditional Audit Techniques

  • Use of the Death Master (DMF) File – Auditors are running the participating state shareholder files against the DMF where the DMF identifies the shareholders as deceased.  Issuers are then tasked to demonstrate proper contact with a beneficiary or heir within the dormancy period.  Any account without proper contact is potentially reportable by the auditor.
  • Use of the National Change of Address (NCOA) Database – Auditors are running the NCOA database against the participating state shareholder database to identify instances where the name and address on the transfer agents’ books and records are different.  Issuers are then tasked to demonstrate contact with the shareholder within the dormancy period of the state of last known address on file at the transfer agent.  This is what we call a “forced” Returned Post Office mail (RPO).  Accounts that meet these criteria are put on the initial audit findings reports.  Issuers are then asked to send due diligence notices to the shareholders to stimulate contact with the owners.  Any account where contact occurs from these audit-initiated notices is then potentially reportable by the auditor.  
  • Use of a state’s miscellaneous intangible provision – Auditors are overlooking certain states that have a RPO provision and attempting to assert a state’s miscellaneous intangible provision for security property types.  The miscellaneous intangible provision is based solely on inactivity and does not account for returned mail.  

Securities Unclaimed Property Issue Prevention

The scenarios mentioned above are preventable by taking the following actions:

  • Limit the data produced to the auditor – Only share data relevant for the auditor to identify accounts that meet the dormancy standards outlined in the state’s statutes.   
  • Perform a proactive outreach to your shareholders – Leverage tools to identify shareholders who may be deceased or live at an address different than the transfer agent’s books and records and perform a periodic and proactive outreach to the shareholders or heirs in an attempt to re-engage the rightful owner of the account.
  • Ask the auditors for something in writing – Anytime an auditor is using a trigger that does not apply to the property type in question, push back on the auditor and ask them to provide documentation from the state that the specific trigger used is correct as opposed to the section of the law that may apply to the specific property type.  
  • Engage outside counsel – Using outside counsel can help speed up the audit and help address any issues from a legal standpoint.


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Brian McCarthy

As a Senior Consulting Manager, Brian serves as a subject matter expert in unclaimed property and the financial services industry. He brings to his role over 10 years of experience managing unclaimed property within the broker-dealer and investment banking sectors.
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