The Uniform Law Commission is making some progress in its efforts to streamline and tame state unclaimed property regulation.
The ULC, a body that provides states with legislation meant to clarify and stabilize state law, is mobilizing those in the abandoned and unclaimed property profession to update and revise the 1995 Uniform Unclaimed Property Act. States are free to adopt or set aside ULC legislative recommendations, but the ULC plans to promote a revised act to encourage state governments to adopt new methods for administering unclaimed property law.
Cindy Nisley, chief operating officer at shareholder services firm Georgeson Securities Corp., says the ULC committee that is working to revise the Uniform Unclaimed Property Act met recently and agreed on several important measures that, if adopted by states, would curtail some escheatment activity that companies have protested as heavy handed. Escheatment is the term for the state’s collection of unclaimed property with the intention of reuniting it with its rightful owner. “One of the most important is that states should no longer liquidate securities upon escheatment, but should instead return the assets in their original form,” she says, or at current market value, including any effects of stock splits or other corporate actions.”
The ULC set into motion a revision of the UUPA in large part to respond to the practices in many states of engaging contingency-fee audit firms and extrapolating and estimating unclaimed property amounts, even where there’s no direct evidence of abandoned property, says Nisley. “It’s almost like being guilty until proven innocent,” she says of the aggressive audit and collection efforts. “Companies have to really push back on the assumptions. It really goes back to record retention. That’s another issue that the ULC is grappling.”
The ULC’s drafting committee has identified about 75 issues with the 1995 UUPA that should be addressed, drafted new language, and met in early November to begin working through suggested changes, says Nisley. State representatives are pressing for shorter dormancy periods on unclaimed property that would enable them to seize unclaimed property even sooner than they can today, she says. A number of the recommendations being debated, she says, focus on the proper treatment of long-term investments, where owner action on those may be limited intentionally because funds are meant to grow over many years. Many states interpret inaction quite differently, she says.
“We are a ways away from seeing the benefits of this, but it’s a positive process that will hopefully bring states into more alignment,” Nisley says. “The idea is to put some clarity around the issues that are not interpreted in similar ways, so companies can get into compliance and individuals will be protected and will know what they need to do to protect their property.”
The drafting committee will meet again early in 2015 with a goal to produce a finished product in 2016, then begin shopping it around to states for their consideration for adoption.