Protecting Investor Assets from Escheatment – Thank You STA!
U.S. public company issuers should say a big ‘thank you” to the Securities Transfer Association under the leadership of Charles (Charlie) Rossi, for playing a major role in keeping states from grabbing shareholders’ property that is allegedly but not actually “lost.”
The latest show-down was on April 4, 2012, when Rossi wrote Delaware Governor Jack Markell. That strategic state in Corporate America was suggesting that direct deposit of dividends did not represent “contact” with a shareholder, like the shareholder’s cashing of a dividend check does – which could thus result in that shareholder being considered “lost” and his/her property deemed escheatable to the state of last known address (e.g., Delaware). Rossi pointed out not only the absurdity of this position, but also the fact that its inherent lack of due diligence flies in the face of federal escheatment laws.
A month later Delaware’s Division of Revenue “clarified” their position, saying shareholders who have their dividends directly deposited or reinvested and do not have their 1099 returned as undeliverable are not considered lost. Moreover, Delaware will consider contact or activity in one security administered by a transfer agent as contact or activity for any other security held by the shareholder with that transfer agent. Lastly, Delaware will accept a Form W-8 received within three years from a foreign shareholder as sufficient contact to avoid “lost” status.
Bottom line: Rossi and the STA are doing a great job helping protect the assets of investors held at American transfer agents, keeping otherwise vulnerable money out of too many unworthy hands.