March 25, 2011
I'm writing regarding proposed revisions to rules regarding due diligence in the delivery of dividends, interest and other valuable property to missing securities holders [§929W].
The current system is horribly flawed and in no way protects the consumer, even with the proposed new legislation.
Here's the loophole:
While the transfer agents, and now possibly the broker-dealers, have to perform due diligence, it costs shareholders 35% or more. Let me explain.
And forgive me if I seem condescending, but I cannot imagine that you know this goes on and the SEC is giving it its stamp of approval.
Finder companies have two faces: "We'll find your accounts that need to be turned over to the state. We'll even try to find the shareholders for you." Some of them advertise that it is free to the holding company with "only a nominal fee to your shareholder."
Since when is 35% a nominal fee? The shareholder bears the entire cost of the company's due diligence efforts. Shareholders cannot find the money because it is in the pre-escheat phase. My friend was contacted by Keane for about $7,200 in American Express stock that her mother earned while working for them. Their fee was approximately $2,100. At this point she did not know where the money was from.
It took her a while, but she found information that gave her the clue about the AMEX stock. In the meantime, the stock increased in value to $7,800. She got another solicitation from Keane with a proportionate increase in their fee. By working with the transfer agent, she has accepted that she will indeed have to pay a fee — $285 for probate filing. That's quite a difference.
I don't know if this is possible, but one of the biggest and easiest solutions is to require the shareholder to be informed about unclaimed property laws and educate them on how to prevent their investments from getting turned over to the state in the first place.
I encourage you to take steps to prevent the problem instead of trying to fix it.
National Find Your Missing Money Day is April 16!
Author, The Little Book of Missing Money