KeepUP™ Blog

The California State Controller’s Office (SCO) Unclaimed Property Division recently experienced a data breach after an employee clicked on a phishing email. According to the Notice of Data Breach posted on the SCO’s webpage, an unauthorized user had access to the employee’s email account from March 18, 2021 at 1:42pm to March 19^, 2021 at 3:19pm.

As we find ourselves preparing for Spring reporting (corporations must start the Spring season by submitting reports to Delaware by March 1^st), it is worth highlighting several aspects of the due diligence and reporting processes.

Due Diligence Notices. The due diligence letter is a state mandated requirement that the holder provide notice to the owner before the property is reported and remitted to the state as unclaimed property and is also the holder’s last attempt to establish contact with the owner of dormant property before escheatment.

Method, Timing and Content of the Notice. Typically, a first-class mailing must be sent to the owner 60 to 120 days prior to filing the report, though as is common in unclaimed property, time frames vary state to state. Moreover, certified mail may be required in lieu of, or in addition to, first-class mail (e.g., New York: certified mail for property valued at $1000 or more and for all dividend reinvestment plans). Publication is also required for certain holders in New York, where requirements vary by property type). Many states also provide an exception for mailing to a known bad address, but again, this varies by state.

In states that have adopted a law based on the 2016 Revised Uniform Property Act (“RUUPA”), the time frame for mailing is generally 60-180 days before filing the report, though there are outliers here as well (e.g., Illinois requires notice to be sent 60 days to 1 year prior to the report, and by certified mail for securities valued at $1000 or more, 60 days prior to filing the report). These states have also adopted specific header and language requirements for the notice.

Delaware continues to focus on unclaimed property compliance, with its’ Voluntary Disclosure Agreement (VDA) program at the forefront of this push.  The DE Secretary of State (SOS) has indicated its intent to mail the latest round of VDA invitations on or about February 19, 2021. VDA invitations are sent several times per year to companies that are identified by the state as “likely being out of compliance” with Delaware’s unclaimed property law. 

Delaware’s Office of Unclaimed Property (OUP) has updated its payment instructions for wire and ACH payments, in advance of the upcoming March 1, 2021 Spring reporting deadline. 

On January 12, 2021, the Department of Labor (DOL) issued a series of guidance for pension plan fiduciaries related to missing or nonresponsive participants, which can assist them in their review of their policies and procedures surrounding locating these participants and their beneficiaries and as related to uncashed checks.

Financial institutions, like other entities, must comply with state unclaimed property laws, which include sending customers due diligence notices and reporting dormant accounts to the states on an annual basis.

Banking property, including checking accounts, savings accounts, and certificate of deposits are considered dormant absent owner-generated activity within a period of time defined by the state (typically 3 or 5 years). The recent adoption by several states of revised unclaimed property laws modeled on the 2016 Revised Uniform Unclaimed Property Act (RUUPA) and the continued introduction of similar legislation (North Dakota and Indiana in early January 2021), illustrates the ever-changing nature of these laws and the need to monitor legislative changes. States adopting a “RUUPA” – like law may adopt the shorter dormancy period (3 years) for most property types, alter the 60-180 due diligence timeframes and/or add the requirement that notice be sent to the owner via first class mail and email (if the owner has consented to electronic mail communications from the holder).

Taking a proactive approach to the escheatment process by communicating early and often with your customers decreases the population of reportable property, meaning less costs associated with due diligence (certified mail, return receipt requested, is required in some states, particularly above a certain dollar threshold) and with the reporting process itself.

After the Shareholder Services Association (SSA) and Securities Transfer Association (STA) voiced their concerns via a joint letter to the National Association of Unclaimed Property Administrators (NAUPA) regarding the interruption of international mail delivery due to the COVID-19 pandemic, NAUPA sent a survey to its member states in May 2020.  

The apprehensions raised were surrounding the suspension of mail service, which would prevent the successful completion of due diligence and ultimately the reporting property without a last attempt at reunification with the property owner.  It is notable that states may liquidate securities property, making it difficult for the shareholder to retrieve it in its native form.   In connection with ongoing concerns expressed by UPPO and the holder community, NAUPA recently released the responses from 19 states to the following questions:

Vermont recently provided clarification for holders reporting unclaimed property to the state in Spring 2021. Holders should follow the statute currently in effect (§1247 Chapter 14, V.S.A. Title 27), and should not apply the provisions of the Revised Uniform Unclaimed Property Law (House Bill 550, effective January 1, 2021), until the following reporting season.

The guidance provided by the Office of the State Treasurer states the following:

The new RUUPA guidelines will start for January 1, 2021 and next reporting year. That means the current statute applies to this reporting year and should be followed for all reports sent for the spring reporting season.

Reporting Unclaimed Property to Vermont

Per the state's current Unclaimed Property Reporting Manual, holder reports are due to the Treasurer's Office by May 1st of each year. If May 1st falls on a weekend or holiday, reports are due the next business day. As May 1, 2021 is a Saturday, reports for the year ended December 31, 2020 must be received by May 3, 2021.

States often send official communications to companies regarding unclaimed property. While some of these mailings are mere filing reminders, other types of communications, such as VDA invitations, audit letters, and self-audit letters, urge holders to take affirmative steps to comply or demonstrate compliance with the unclaimed property laws. We will discuss some, but not all of these types of communications, to assist companies in understanding what each one means, and what holders should consider upon receipt of such a communication.  

Delaware – VDA Invitations and Audit Notices:

We recently posted that the Delaware Department of Finance is expected to send new unclaimed property audit notices in the near future to businesses who did not enroll in the state’s Voluntary Disclosure program (VDA program) in response to the Secretary of State’s invitation to participate in the program dated August, 21, 2020. Under Delaware law, businesses who do not enroll within the 60-day notice period in the letter will be referred to the Department of Finance for an unclaimed property audit.

Indiana, Pennsylvania, Utah and Washington: The Self-Audit Letter

Indiana, Pennsylvania, Utah and Washington have recently started mailing holders letters on official state letterhead that advise holders of their obligation to comply with the unclaimed property laws. Further, the letter proclaims that based on the state’s records, the holder “has never” or “only rarely” reported unclaimed property to the state.

MarketSphere Unclaimed Property Specialists has learned that the state of Delaware will soon be mailing unclaimed property audit notices to those companies who did not respond to the latest round of invitations sent by the state on August 21, 2020 to enroll in the Secretary of State’s Unclaimed Property Voluntary Disclosure Program (VDA program). Approximately 200 holders received these letters, which notify the holder that it is “likely out of compliance” with Delaware’s unclaimed property law and inviting them to participate in the VDA program. Any company can receive a VDA invitation, including public or private corporations, large Fortune 500 companies and smaller companies.

In accordance with Delaware law, the state cannot initiate a new unclaimed property examination (audit) without first notifying the company that it may enter into the Secretary of State’s VDA program (12 Del. C. Ch. 11, section §1172).   These letters put the company on notice that if the holder does not enroll in the VDA program, the Secretary of State’s Office will refer the company to the Delaware Department of Finance, who will issue an unclaimed property audit notice upon the expiration of the 60-day notice period.