Avoiding pitfalls in unclaimed securities reporting

Reporting unclaimed or abandoned securities held in brokerage accounts can be daunting and fraught with unforeseen risks. That’s why we’ve prepared this “quick guide” checklist of some of the key details that brokerage companies should be aware of when preparing to report abandoned securities to the states.

1. Keep track of dates

A complex and non-uniform web of date driven events are central to unclaimed securities reporting (dormancy) requirements, and the maintenance and updating of these dates is critical to the application of state-specific reporting requirements. Different dates to consider are:

• Date of birth
• Date of required minimum distribution
• Date of death
• Date of uncashed dividend checks
• Undelivered mail

Maintain the date(s) on which a piece of mail is returned as undeliverable by the post office to the address you have on file.

• Latest owner generated activity (OGA)

This can take many forms and the latest date across each of these forms should be constantly maintained. Activity such as (but not limited to) calls from the owner, online log-ins, placing trades (buying or selling) and written correspondence are all forms of OGA. Companies should also be aware of non-OGA dates and avoid inadvertently capturing them into this category. Automatic dividend reinvestments, execution of limit orders, outgoing calls to the owner and other types of activity may not be accurate indications of OGA.

2. Calculate dormancy based upon type of account holding the securities

Different calculations may be necessary for the same unclaimed security depending on the type of account in which the security is held. For example, the dormancy rules for a retail trading account can differ from those of an IRA account holding the same security. Different types of dates and dormancy periods may apply in each calculation, so it’s important to understand individual state rules for each type of account holding securities.