Over the past several years, a notable increase in new entrants has emerged in the field of unclaimed property services, driven by intensified state efforts to generate funds. The number of providers has risen from two to over twenty, including the return of major accounting firms and the establishment of practices by large law firms.

To address these changes, we are updating the introduction in our Directory, emphasizing the importance of careful due diligence before engaging service providers in this complex field. We present a primer on the four key components of an effective compliance program: Search, Reporting, Escheatment, and “Cleanup” or “Asset Reunification Services,” all governed by federal and state regulations.

While most public companies rely on transfer agents and external service providers for these duties, it’s crucial to note that the ultimate responsibility lies with the issuer. Legal rulings stress the duty of issuers to act in the best interests of shareholders, making thorough searches imperative to avoid issues like theft or fraudulent schemes.

SEC rules mandate an automated “search” for shareholders with undeliverable mail, but issuers must be cautious in selecting providers, as some intentionally use subpar databases to maximize commissions or focus on controversial “asset recovery programs.”

Conflicts of interest can arise between a public company’s best interests and those of service providers, necessitating careful vetting. States’ unique laws on reporting and escheatment add complexity, with tightening rules, shortened dormancy periods, and proposed measures. States often sell “underlying shares,” leading to potential multi-million-dollar lawsuits for issuers.
The solution to these compliance challenges is straightforward: engage an experienced and ethical service provider for an ongoing “asset reunification program.” With modern databases, locating “lost shareholders” becomes feasible. Thorough vetting should ensure fair fees and robust controls.

Focusing on asset recovery programs over escheatment, when done correctly, eliminates the need for intrusive state audits and reporting. Transfer agents listed in our Online Directory provide a starting point for selecting reliable service providers.

In conclusion, navigating abandoned property compliance requires a proactive and diligent approach, careful selection of service providers, and a commitment to ethical practices.