SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 240 and 249
[RELEASE NO. 34-39176; File No. S7-21-96]
RIN 3235-AG99
LOST SECURITYHOLDERS
AGENCY: Securities and Exchange Commission
ACTION: Final Rule
SUMMARY: The Securities and Exchange Commission is adopting Rule 17Ad-17
and Rule 17a-24 under the Securities Exchange Act of 1934. Rule 17Ad-17,
which is designed to address the problem of "lost securityholders,"
requires transfer agents to conduct searches in an effort to locate lost
securityholders. Rule 17a-24, which is designed to assist the Commission
in monitoring the effects of Rule 17Ad-17, requires transfer agents to file
information on lost securityholders with the Commission. The rules are
designed to reduce the number of lost securityholders.
EFFECTIVE DATE: 240.17Ad-17 and 240.17Ad-7(i) will be effective [Insert
date 60 days after publication in the Federal Register] and 240.17a-24
and 249b.102, the amendments to Form TA-2 will be effective [Insert date
120 days after publication in the Federal Register].
FOR FURTHER INFORMATION CONTACT: Jerry W. Carpenter, Assistant Director;
Christine Sibille, Senior Counsel; Jeffrey Mooney, Attorney; or Theodore
Lazo, Attorney at 202/942-4187, Office of Risk Management and Control, Mail
Stop 5-1, Division of Market Regulation, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION:
I. INTRODUCTION AND BACKGROUND
Transfer agents serve as the custodians of securityholder records,
including records of securityholders' addresses, for issuers. In this
capacity, transfer agents frequently are responsible for disseminating
shareholder communications and dividend and interest payments. For various
reasons, transfer agents occasionally have outdated or incorrect addresses
for some securityholders ("lost securityholders").<(1)> As a result,
these shareholders do not receive dividend and interest payments to which
they are entitled. Generally, issuers retain custody of such dividend and
interest payments, and if contact is not reestablished with a
securityholder prior to the expiration of the appropriate state's escheat
period, the issuer must turn the securityholder's assets over to the state
unclaimed property administrator. While various transfer agents attempt to
locate lost securityholders, the extent and type of efforts used vary
considerably from one transfer agent to another.<(2)> The Securities
and Exchange Commission ("Commission") believes that establishing minimum
search requirements in this area will facilitate locating lost
securityholders.
On August 22, 1996, the Commission issued for comment a release
("Proposing Release")<(3)> proposing Rule 17Ad-17<(4)> and Rule
<(1)> For example, some securityholders do not provide a new
address when they move.
<(2)> See Securities Exchange Act Release No. 37595 (August
22, 1996), 61 FR 44249 (release proposing Rule 17Ad-17
and Rule 17a-24), note 13 (discussing the methods
transfer agents currently use to locate lost
securityholders).
<(3)> Id. The Commission later extended the comment period
contained in the Proposing Release. Securities
Exchange Act Release No. 37949 (November 15, 1996), 61
FR 59046 (extending comment period).
======END OF PAGE 2======
17a-24<(5)> under the Securities Exchange Act of 1934 ("Exchange Act")
and proposing amendments to Rule 17Ad-7,<(6)> which were designed to
address the problem of lost securityholders. Proposed Rule 17Ad-17 would
require that transfer agents exercise reasonable care, including conducting
data base searches, in an effort to locate lost securityholders.<(7)>
The proposed amendment to Rule 17Ad-7 set forth the retention time periods
for the records relating to compliance with proposed Rule 17Ad-17.
Proposed Rule 17a-24 would have required certain entities that hold assets
for others (e.g., transfer agents and broker-dealers) to file annually with
the Commission a list of the social security numbers of all lost
securityholders contained in their records. The Proposing Release also
requested comment on whether either the Commission or a private entity
should create and operate a lost securityholder data base.
<(4)>(...continued)
<(4)> 17 CFR 240.17Ad-17.
<(5)> 17 CFR 240.17a-24.
<(6)> 17 CFR 240.17Ad-7.
<(7)> The Proposing Release also discussed transfer agents'
obligations under Rule 17Ad-10 to maintain and keep
current accurate master securityholder files (defined
below in note 10), which include information such as
securityholders' names and addresses. The Proposing
Release concluded that maintaining accurate master
securityholder files is one of the most basic steps in
addressing the lost securityholder problem. The
Commission believes that conducting data base searches
for lost securityholders pursuant to Rule 17Ad-17 will
enhance a transfer agent's fulfillment of its
responsibilities under Rule 17Ad-10.
======END OF PAGE 3======
The Commission received 57 comment letters from 52 commenters in
response to the Proposing Release.<(8)> The commenters in general
expressed support for proposed Rule 17Ad-17 although several commenters
expressed concerns about specific provisions of the proposed rule. The
commenters in general expressed concern about proposed Rule 17a-24. The
Commission is adopting Rule 17Ad-17 substantially as proposed but with some
modifications to reflect commenters' views and is amending Rule 17Ad-7 as
proposed. The Commission is adopting proposed Rule 17a-24 with substantial
revisions and is making related changes to Form TA-2.<(9)> In
addition, the Commission has directed its staff to review the operations of
the adopted rules after three years and to report back to the Commission on
its findings.
II. DISCUSSION
A. Rule 17Ad-17: Obligation to Search
As adopted, Rule 17Ad-17 requires that transfer agents exercise
reasonable care to ascertain the correct addresses of all lost
securityholders in their records. At a minimum, transfer agents must
conduct two searches using an information data base. In addition, transfer
agents may not use any service designed to locate their lost
<(8)> The Commission received comment letters from eighteen
transfer agents, five trade associations representing
transfer agents, five individuals, three corporations,
one broker-dealer, two professional search firms, and
eighteen government entities. A summary of comments
has been prepared by the staff of the Division of
Market Regulation. The summary is included along with
the comment letters in Public File No. S7-21-96, which
is available for inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549.
<(9)> Form TA-2 is referenced in 17 CFR 249b.102.
======END OF PAGE 4======
securityholders that results in a charge to a securityholder until after
the two data base searches have been conducted.
1. Definition of Lost Securityholder
Rule 17Ad-17 generally defines a "lost securityholder" as a
securityholder to whom an item of correspondence that was sent to the
securityholder at the address in the transfer agent's master securityholder
file has been returned as undeliverable.<(10)> However, if a
transfer agent re-sends the returned item to the securityholder within one
month, the transfer agent has the option to delay classifying the
securityholder as lost for purposes of Rule 17Ad-17 until the item is again
returned to the transfer agent as undeliverable. If and when a transfer
agent receives a new address for a lost securityholder, either directly
from the securityholder or through the transfer agent's own efforts, the
securityholder will no longer be classified as lost. Under the
definition as proposed, a securityholder would have been classified as lost
only after two separate items of correspondence mailed at least three
months apart had each been returned as undeliverable. Commenters in
general were opposed to a requirement that three months elapse between the
mailing of two undeliverable items of correspondence, stating that this
approach would increase costs by requiring transfer agents to initiate new
coding mechanisms.<(11)> In addition, some commenters stated that
<(10)> "Master securityholder file" is defined in Rule 17Ad-
9(b) as the official list of individual securityholder
accounts.
<(11)> The Proposing Release noted that the three month period
was intended to give transfer agents time to receive
any delayed change of address notifications prior to
having to conduct searches.
======END OF PAGE 5======
continuing to mail distributions to an incorrect address increases risk of
loss. Commenters also noted that the proposed definition of lost
securityholder could result in long delays before some shareholders are
defined as lost.<(12)>
The Commission believes that the revised definition produces a more
consistent result as to when shareholders are classified as
lost.<(13)> In addition, the Commission understands that some
transfer agents have internal procedures whereby they promptly remail
returned correspondence because they have found such remailing procedures
to be beneficial in reducing the number of lost
securityholders.<(14)> Therefore, the revised definition gives
transfer agents flexibility to delay coding a securityholder as lost until
after the remailed item is returned as undeliverable. In addition,
the Commission is making minor technical amendments to the proposed
definition of lost securityholder. For example, to take into account
<(12)> For example, if an issue does not pay dividends or
interest, the only securityholder correspondence may be
the annual report. In such an instance, a
securityholder would not have been classified as lost
until a year after the first correspondence had been
returned as undeliverable.
<(13)> The revised definition avoids situations where
securityholders of issues with quarterly mailings would
have been defined as lost three months after a
correspondence was first returned as undeliverable
while securityholders of issues with only annual
mailings would not have been defined as lost until a
year after a correspondence was first returned as
undeliverable.
<(14)> Transfer agents have found that some items are returned
as a result of the deliverer's error rather than an
incorrect address and that remailing will result in the
securityholder receiving the item.
======END OF PAGE 6======
future developments in the methods used to disseminate shareholder
communications, the rule no longer refers to returned correspondence that
were "sent by first class mail."
2. Transfer Agents' Search Requirements
a. Type of Search
Rule 17Ad-17 requires every recordkeeping transfer agent whose master
securityholder file includes accounts of lost securityholders to search for
such securityholders' current address using at least one information data
base. The transfer agent's search for a lost securityholder must be based
on the taxpayer identification number ("TIN") or on the name of the lost
securityholder if a search based on TIN is not reasonably likely to locate
the lost securityholder.
As originally proposed, the search could be based on a
securityholder's name if such a search was reasonably likely to locate the
lost securityholder. Commenters were divided as to the advisability of
such provision. While most commenters agreed that TIN searches are more
effective, some commenters argued that transfer agents should have the
flexibility to search by name when advisable (e.g., when the TIN is missing
or incomplete). By revising the requirement to permit name searches only
when a TIN search is not reasonably likely to locate the lost
securityholder (e.g., when the TIN is missing or incomplete), the
Commission believes transfer agents are afforded sufficient flexibility to
conduct the most effective search.
b. Time Frames for Search
The rule as adopted also differs from the proposal with respect to the
time frames in which the searches must be conducted. As proposed, a
======END OF PAGE 7======
transfer agent would have had to conduct a search within three months of a
securityholder being classified as lost. If after the first search the
securityholder had continued to be classified as lost, the proposal would
have required another search between 12 and 18 months after the initial
search. Many commenters suggested that conducting an initial search three
months after a securityholder was classified as lost was too soon for the
data bases to be updated, and that conducting a second search between 12
and 18 months after the first search was too long a period from loss of
contact.
As adopted, a transfer agent must conduct the initial search between
three and 12 months of a securityholder being classified as
lost.<(15)> If the lost securityholder is not found, the transfer
agent must conduct a second search between six and 12 months after the
initial search.<(16)> The second search is intended to take
advantage of address changes that may have been added to the data base
<(15)> As discussed in the Proposing Release, the Commission
encourages transfer agents to take immediate steps upon
learning a shareholder's address may not be correct.
Proposing Release, note 16. The Proposing Release
discusses several techniques that, while not required
by the rule, may be beneficial in reducing the number
of lost securityholders for which the transfer agent
must search. Proposing Release, note 13.
<(16)> Demonstrated below are time frames in which the second
search would need to be conducted depending upon when
the first search occurred.
3 9 12 15 18 21 24
Lost Mos. Mos. Mos. Mos. Mos. Mos. Mos.
³ ³ 1st Search ³
1st search at:
3 mos. ³ 2d Search ³
6 mos. ³ 2d Search ³
9 mos. ³ 2d Search ³
12 mos. ³ 2d Search ³
======END OF PAGE 8======
after the initial search. The transfer agent must conduct these searches
without charge to a lost securityholder.
Under the proposed rule, the time in which transfer agents would have
been required to conduct the first search would have depended on the
frequency of mailings associated with an issue. (The first search would
have had to be conducted between three and 15 months after the return of
the first correspondence based on whether the issue had quarterly or annual
mailings.)<(17)> Because the timing of the search requirements would
have been dependent upon the frequency of issuers' mailings, commenters
noted that transfer agents would not have had much flexibility in
determining when to search for lost securityholders.
Under the adopted rule, the first search must be conducted between
three to 12 months after the first correspondence is returned. However,
unlike the proposed rule, transfer agents may search at any time during
this period. As a result, transfer agents' search requirements are
triggered within basically the same time frames whether there are quarterly
or annual mailings, but transfer agents will be better able to use their
discretion as to the most appropriate time to conduct the searches.
Additionally, this revision may permit transfer agents to conduct more
cost-effective searches by allowing transfer agents to bundle together many
lost securityholders for submission to a data base service which should
lower internal costs and increase the likelihood that transfer agents will
qualify for volume discounts from data base services.
<(17)> Between three to 12 months would have elapsed between
the first and second returned items of correspondence,
and the first search would have had to be conducted
within three months after the return of the second item
of correspondence.
======END OF PAGE 9======
c. Exceptions to the Search Requirement
In the Proposing Release, the Commission requested comment on whether
the requirement to search for lost securityholders should apply only when a
lost securityholder's account contained assets over some de minimis
amount.<(18)> Many commenters agreed that transfer agents should not
be required to expend funds to search for a lost securityholder when the
cost of a search could exceed the amount in the securityholder's account.
Although varying de minimis amounts were suggested, most commenters favored
a de minimis threshold of $100 per account.
The Commission believes that there should be a de minimis exception
from the search requirements that will allow transfer agents to forgo
searches that would not be cost-effective. Based on what the Commission
understands to be the low cost of data base searches,<(19)> the
Commission is amending the proposed rule to permit transfer agents to
exclude from the search requirements any lost securityholder when the value
of all dividend, interest, and other payments due to the securityholder
plus the value of all assets listed in the lost securityholder's account is
less than $25. The Commission believes that this exemption will reduce the
<(18)> In calculating this amount, all assets in that account
for which the transfer agent maintains records are
included regardless of whether the transfer agent is
actually in possession of the property. Therefore, the
value of the assets in the securityholder's account
includes dividends, interest, and other payments due to
the securityholder and the value of any underlying
assets (e.g., the value of securities owned by the
shareholder as shown on the transfer agent's records).
<(19)> Refer to Section IV below for a discussion of the cost
of data base searches.
======END OF PAGE 10======
economic impact of the rule on transfer agents while still affording
sufficient protection to securityholders.<(20)>
In the Proposing Release, the Commission noted that data base searches
generally are considered a cost-effective way to locate lost
securityholders. The Commission requested comment on the potential
effectiveness of the rule in addressing the lost securityholder issue. The
request was intended to elicit comment on situations where data base
searches would not be an appropriate method of locating lost
securityholders. One commenter requested that exemptions from the search
requirement be created for certain categories of securityholders that will
not be reached through an electronic data base search, specifically any
lost securityholder (1) whose last known address is outside of the United
States; (2) whose account has a missing or incomplete TIN; (3) which is not
a natural person (e.g., a corporation); or (4) who is known to be deceased.
Based on this request and on additional research into the capabilities
of existing commercial data bases, the Commission has decided to create an
exemption from the search requirements for securityholders for whom the
transfer agent has received documentation of their death<(21)> and an
exemption for securityholders which are not natural persons. The
Commission understands that the data bases relied upon by most transfer
agents do not contain information on estates or heirs and that there is no
<(20)> Some commenters stated that for efficiency reasons some
transfer agents will search for all lost
securityholders.
<(21)> Such documentation may consist of a report received
from an information data base.
======END OF PAGE 11======
automated method by which such information can be obtained.<(22)>
Securityholders which are not natural persons likewise cannot be located
easily through the use of information data bases and comprise a minuscule
percentage of the total amount of lost securityholders.
The Commission is not adopting the other suggested exemptions because
data base searches for those categories of lost securityholders could in
many cases be effective. For example, although the Commission understands
that most data bases currently do not contain the names of individuals
living outside of the United States, it is possible that a securityholder
with a foreign last known address was only temporarily living out of the
country and that a data base search will provide an updated domestic
address.
With respect to the commenter's request for an exemption for
securityholders with missing or incomplete TINs, the adopted rule permits
transfer agents to conduct a search based on a lost securityholder's name
when a search based on a TIN is not reasonably likely to locate a lost
securityholder. Therefore, the Commission also believes that no exemption
should be created for accounts with missing TINs.
d. Assessment of Procedures
In the Proposing Release, the Commission requested comment on whether
the rule should include (1) a requirement that transfer agents periodically
assess the effectiveness and appropriateness of the search procedures and
<(22)> The Commission has been informed that in the future
some information data bases may be updated to include
beneficiary data. If a low cost method of determining
a deceased's beneficiary becomes available, the
Commission may reexamine the application of search
requirements to this category of securityholder.
======END OF PAGE 12======
technology they employ, and/or (2) a requirement that transfer agents'
search procedures meet a performance standard based on success in locating
lost securityholders. Most commenters that addressed the issue generally
did not support adopting a strict application of this requirement. For
example, some commenters believe that transfer agents should not have an
absolute requirement to locate a certain percentage of their shareholders
because the results of the searches frequently were outside of their
control. While the adopted rule does not specifically contain such
requirements, the Commission believes that transfer agents should bear
these concepts in mind in determining whether they have met their
obligation to exercise reasonable care under Rule 17Ad-17(a). For example,
if a transfer agent is using a data base service that routinely fails to
locate any or that locates only a very small percentage of lost
securityholders, the transfer agent should evaluate whether the use of such
service constitutes the exercise of reasonable care.
3. Definition of Information Data Base
As proposed, Rule 17Ad-17 would have defined an information data base
as any automated data base service that (1) contains addresses of U.S.
residents, including addresses in the geographic area in which the lost
securityholder's last known address is located, (2) covers a reasonably
broad geographic area, (3) is indexed by TIN or by name, and (4) is updated
at least four times a year. The Commission has revised the definition
based on commenters' suggestions. The first requirement has been revised
to require that the data base contain addresses from the entire United
States. The second requirement has been revised to require that the data
base contain names of at least 50% of the U.S. adult population. The third
======END OF PAGE 13======
requirement also has been revised to clarify that an information data base
must be indexed by TINs if a TIN search is used or by name if a name search
is used. The fourth requirement is adopted as proposed. The revisions are
intended to preclude the use of a data base that contains a small number of
names but covers a broad geographic area or one that contains a large
number of names but covers only a small geographic area.
The Commission also is adopting an alternative standard that will
provide flexibility to transfer agents in fulfilling their obligations to
search for lost securityholders. The alternative will permit transfer
agents to use any service to locate lost securityholders if that service
produces comparable results to the information data base described above.
As part of their obligation to maintain records discussed below, a transfer
agent relying on this alternative would be required to develop written
procedures documenting and describing the alternative service used.
4. Use of Professional Search Firms
The Proposing Release discussed the current practice of some transfer
agents to use professional search firms that charge a lost securityholder a
fee for locating the lost securityholder's assets. As proposed and as
adopted, Rule 17Ad-17 will prohibit a transfer agent from using any service
to locate a securityholder that results in a charge to the securityholder
until after the two data base searches required by the rule have been
conducted. While a few commenters argued against the proposed prohibition,
many commenters supported the provision with some arguing for additional
restrictions.
Although the more extensive search techniques employed by professional
search firms may locate some securityholders that the data base searches
======END OF PAGE 14======
will not locate, the charges of such firms can cost a securityholder a
significant portion of his or her assets. The Commission believes that
transfer agents should make efforts (i.e., the search provisions of Rule
17Ad-17(a)(1)) to locate lost securityholders before permitting services to
charge them for reuniting them with their assets. Therefore, the
Commission is adopting Rule 17Ad-17(a)(2) as proposed to delay transfer
agents' use of professional search firms where the charge is assessed to
the securityholder until after a transfer agent has completed two searches
under Rule 17Ad-17.<(23)>
5. Verification of Securityholder
In order to guard against delivery of distributions to an incorrect
recipient, the Commission recommended in the Proposing Release that
transfer agents should verify that the person at the newly obtained address
is in fact its account holder before disbursing securities or funds. One
commenter expressed concern that requiring a transfer agent to confirm a
securityholder's identity may restrict the transfer agent's ability to
correct its master securityholder file because some shareholders may fail
to return verification forms. The language in the Proposing Release was
not intended to mandate a particular procedure. Instead, it was intended
to highlight the need for transfer agents to use care prior to disbursement
of securityholder funds. Prior to disbursing funds or to updating their
<(23)> Because a professional search firm that charges a fee
to the transfer agent rather than to lost
securityholders could qualify as an information data
base search under the rule, professional search firms
could be used to satisfy the transfer agent's search
obligation under Rule 17Ad-17.
======END OF PAGE 15======
master securityholder files, transfer agents should determine whether such
action is appropriate based on all relevant factors.
B. Rules 17Ad-7 and 17Ad-17: Recordkeeping Requirements
Rule 17Ad-17 requires that all recordkeeping transfer agents maintain
records to demonstrate their compliance with the requirements under the
rule. Paragraph (i) is being added to Exchange Act Rule 17Ad-7 to require
that transfer agents maintain the records required by Rule 17Ad-17 for a
period of not less than three years and that transfer agents maintain these
records in an easily accessible place during the first year.<(24)>
In the Proposing Release, the Commission suggested that transfer
agents document the date each securityholder is classified as lost and the
date the data base searches are conducted. One commenter interpreted this
discussion to be a requirement that such dates be recorded on each lost
securityholder's individual account record. This commenter stated that
this requirement could require costly systems upgrades and that transfer
agents instead should be allowed to demonstrate that data base searches
have been conducted by referencing procedures that are in place and that
reasonably assure that the searches are conducted on a timely basis. The
language in the Proposing Release was not intended to specify the
recordkeeping method to be used by transfer agents. Rather it was intended
to provide flexibility to transfer agents to create systems that adequately
demonstrate compliance with Rule 17Ad-17. However, the Commission does not
<(24)> Rule 17Ad-7 sets forth the lengths of time and the
methods by which transfer agents must maintain the
records which they are required to keep pursuant to
Exchange Act Rules 17Ad-6, 17f-2, and 17Ad-17.
======END OF PAGE 16======
believe that referencing procedures without any specific documentation
demonstrating that searches have been appropriately conducted is adequate.
The Commission also is adding language to Rule 17Ad-17 to clarify that
transfer agents must maintain written procedures on how they will comply
with the rule. The amendment to the rule is intended to give transfer
agents more guidance on what the minimum recordkeeping requirements are
while still providing flexibility to determine the most efficient method of
demonstrating compliance with the requirements of the rule.
C. Rule 17a-24: Lost Securityholder Data
In the Proposing Release, the Commission also discussed the creation
of a data base that would contain information (e.g., TINs) on all lost
securityholders. Proposed Rule 17a-24 would have required certain entities
that hold assets for others (e.g., transfer agents and broker-dealers) to
file annually with the Commission a list of the TINs of all lost
securityholders contained in their records. The Commission also requested
comment on whether the Commission or its delegee should create and operate
a lost securityholder data base or whether the Commission should release
the information it received under Rule 17a-24 to the public to permit
private entities to create data bases.
Most commenters were opposed to the creation of a lost securityholder
data base. Many commenters believed that the data base would result in a
loss of privacy for securityholders. Other commenters suggested that the
data base could result in fraudulent claims. Finally, some commenters
opined that the data base would be of limited utility because it would
require that securityholders take the initiative to discover whether they
had any unclaimed assets.
======END OF PAGE 17======
In response to concerns expressed by commenters, the Commission has
determined to adopt proposed Rule 17a-24 with revisions that will only
require the reporting of certain aggregate data. As noted in the Proposing
Release, the Commission believes that there is a need to gather data on
lost securityholders in order to obtain better information as to the extent
to which lost securityholders are not receiving assets to which they are
entitled and to assess the effectiveness of search techniques employed by
transfer agents.<(25)> Similar to the proposed rule, the final rule
will require each recordkeeping transfer agent to file annually with the
Commission information on lost securityholders contained in the transfer
agent's records.<(26)> However, the Commission has determined to
require transfer agents to submit only aggregate data regarding the
accounts of lost securityholders instead of the individual data that would
have been required by proposed Rule 17a-24. This aggregate information
would have been available by totaling the information that would have been
required by proposed Rule 17a-24 or currently is readily accessible by
transfer agents.
Specifically, the Commission is revising proposed Rule 17a-24 to
require registered transfer agents to disclose the aggregate number of lost
securityholder accounts as of June 30 of each year and the percentage of
total accounts represented by such lost securityholder accounts. These
figures would be reported for specified periods of time: one year or less,
<(25)> 61 FR at 44252-44253.
<(26)> 61 FR at 44253.
======END OF PAGE 18======
three years or less, five years or less, or greater than five
years.<(27)> The Commission also is requiring information on lost
securityholder accounts that escheat to state unclaimed property
administrators on an annual basis. To facilitate the reporting of this
information, the Commission is amending Exchange Act Form TA-2,<(28)>
the annual report of registered transfer agents. The Commission believes
that this will be the least burdensome and most efficient way for transfer
agents to comply with the revised rule.
The Commission believes that revised Rule 17a-24 is preferable to the
rule as proposed at this time. The aggregate information required by the
adopted rule should, as a result of Rule 17Ad-17, be readily available to
transfer agents. Moreover, the collection of aggregate data, rather than
taxpayer identification numbers or other personal data, ameliorates privacy
concerns raised by some commenters. In addition to not requiring
individual data, the revised rule will enable the Commission to better
monitor the effectiveness of Rule 17Ad-17 over time and determine whether
additional measures are necessary to find lost securityholders. Finally,
the Commission has narrowed the scope of the rule. Unlike the proposed
rule which would have applied to any recordkeeping broker-dealer or
transfer agent, as adopted Rule 17a-24 applies only to recordkeeping
<(27)> The Commission requested comment in the Proposing
Release on whether the filing requirement should
include information concerning the length of time
securityholders have been lost. 61 FR at 44253.
<(28)> Pursuant to Exchange Act Rule 17Ac2-2, registered
transfer agents are required to file an annual report
on Form TA-2 by August 31 of each calendar year. 17
CFR 240.17Ac2-2.
======END OF PAGE 19======
transfer agents. The Commission believes that a narrower focus is
preferable at this time.
III. REGULATORY FLEXIBILITY ANALYSIS
The following discussion summarizes the Commission's Final Regulatory
Flexibility Analysis ("FRFA") in accordance with the Regulatory Flexibility
Act ("RFA")<(29)> in connection with Rule 17Ad-17, Rule 17a-24, and
the related amendments to Rule 17Ad-7 adopted today. A complete copy of
the FRFA may be obtained by contacting Theodore Lazo, Attorney, Division of
Market Regulation, U.S. Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at 202/942-4187.
The FRFA explains both the need for and the objectives of the rules
adopted by the Commission. As set forth in greater detail in the FRFA, the
adopted rules will establish minimum standards for all transfer agents with
respect to lost securityholders and may help the Commission to monitor the
effectiveness of these standards. The FRFA further explains that the
Commission believes that imposing an affirmative obligation on transfer
agents to search for lost securityholders is in the public interest and
will enhance investor protection.
The FRFA also (i) summarizes the significant issues raised by public
comments in response to the Commission's Initial Regulatory Flexibility
Analysis ("IRFA"), (ii) summarizes the Commission's assessment of such
issues, and (iii) states any changes made in the proposed rules as a result
of such comments. As noted in the FRFA, none of the comment letters
received related directly to the IRFA, but seven commenters supplied data
<(29)> 5 U.S.C. 601-612.
======END OF PAGE 20======
on the costs of proposed Rule 17Ad-17.<(30)> As discussed in the
FRFA, the Commission believes that most of this cost data is overstated
because it includes costs not created by the rule. The Commission also
believes that the revisions to proposed Rule 17Ad-17 (e.g., the extended
time frames for conducting searches and the exceptions to the search
requirements) will eliminate any excess costs of compliance with the rule
that commenters contended would arise. The FRFA also notes that Rule 17a-
24 has been revised to minimize the costs to all transfer agents.
The FRFA also provides a description of and an estimate of the number
of small entities to which the rule will apply. The FRFA states that the
Commission estimates that 413 registered transfer agents qualify as "small
entities" and will be subject to the requirements of the rule.
As required by the RFA, the FRFA describes the projected reporting,
recordkeeping, and other compliance requirements of the rule and includes
an estimate of the classes of small entities that will be subject to the
requirements and the type of professional skills necessary for preparation
of the reports or records. As discussed above, Rule 17Ad-17 does not
require any specific type of recordkeeping other than that which is
necessary to demonstrate compliance with the rule, including establishing
written procedures with respect to compliance with the rule. The FRFA
states that the Commission believes that Rule 17Ad-17 as adopted provides
sufficient flexibility for all transfer agents, including transfer agents
which are small entities, to maintain records in the most cost-effective
manner. The FRFA also states that the Rule 17a-24 as adopted will require
<(30)> The cost data that the Commission received is discussed
more fully in Section IV below.
======END OF PAGE 21======
transfer agents to report aggregate data regarding their lost
securityholder accounts and that the Commission believes that such records
will be readily available to transfer agents.
The FRFA also describes the steps the Commission has taken to minimize
the significant economic impact on small entities consistent with the
stated objectives of applicable statutes (e.g., alternative standards for
small entities). As discussed further in the FRFA, the Commission has
amended proposed Rule 17Ad-17 to provide additional flexibility to all
transfer agents, including smaller transfer agents. In addition, the
Commission has attempted to devise the most reasonable and simplest
approach that would afford transfer agents an effective means to reduce the
number of lost securityholders. The FRFA further explains that the
Commission requested comment on the adoption of a requirement that transfer
agents use search techniques based on their periodic assessment or a
requirement that transfer agents' search procedures meet a performance
based standard. In light of the comments received on the issue, the
Commission is not adopting a periodic assessment requirement or a
performance based standard. However, the Commission has revised the
proposed rule to permit transfer agents to use any combination of services
to locate lost securityholders that provides a comparable result to an
information data base.
As detailed in the FRFA, the Commission has decided not to create an
exception to Rule 17Ad-17 for small entities. The FRFA explains that the
Commission believes that any increased costs incurred by small entities
because of the rule will be reasonable and are justified by the necessity
to ensure that all securityholders receive the same level of investor
======END OF PAGE 22======
protection. While the Commission has decided not to create an exception to
the rule for small entities, the adopted rule does provide a de minimis
exception for lost securityholders whose accounts hold assets of less than
$25. The Commission believes that small transfer agents will likely rely
on the de minimis exception more than large transfer agents.<(31)>
With respect to Rule 17a-24, the FRFA notes that the Commission has
amended the proposed rule to reduce the reporting burden on all transfer
agents and to minimize the complexity and operational burden of the
requirements. Finally, the Commission states that any increased costs are
justified by the need to monitor the effectiveness of Rule 17Ad-17.
Based on the analysis contained in the FRFA, the Commission believes
that the adopted rules will not adversely affect small entities and include
sufficient regulatory flexibility for compliance to minimize the impact on
small entities. The FRFA is available for public inspection in File No.
S7-21-96, and a copy may be obtained by contacting Theodore Lazo, U.S.
Securities and Exchange Commission, 450 Fifth Street, N.W., Mail Stop 5-1,
Washington, D.C. 20549.
<(31)> The Commission understands that small transfer agents
tend to provide services to issuers with smaller prices
per share. On occasion, when shareholders sell their
positions, they fail to completely close out their
account. As a result, they may leave an account
holding only a few shares or the most recent dividend
payment. Because a few shares of a smaller issuer is
more likely to be under the de minimis amount than a
few shares of a larger issuer, the Commission believes
that the de minimis exception may be more beneficial to
small transfer agents. Some large transfer agents also
have stated that because it is more cost efficient to
search for all of their lost securityholders than to
segregate out the small accounts, they probably will
not use the exemption.
======END OF PAGE 23======
IV. COSTS AND BENEFITS OF THE RULES AND THEIR EFFECTS ON COMPETITION,
EFFICIENCY, AND CAPITAL FORMATION
Section 23(a)(2) of the Exchange Act<(32)> requires the
Commission, in adopting rules under the Exchange Act, to consider the
competitive effects of such rules and to make a determination whether any
burden on competition is necessary or appropriate in furthering the
purposes of the Exchange Act. Furthermore, Section 3 of the Exchange
Act<(33)> as amended by the recently enacted National Securities
Markets Improvement Act of 1996 ("Markets Improvement Act")<(34)>
provides that whenever the Commission is engaged in rulemaking and is
required to consider or determine whether an action is necessary or
appropriate in the public interest, the Commission also shall consider, in
addition to the protection of investors, whether the action will promote
efficiency, competition, and capital formation.
The Commission has considered Rule 17Ad-17 and Rule 17a-24 in light of
the standards cited in Sections 3 and 23(a)(2) of the Exchange Act and
believes that for the reasons stated herein, the adoption of the rules will
(i) promote efficiency for securityholder recordkeeping by subjecting all
transfer agents to the same flexible rules governing searches for lost
securityholders and reporting information to the Commission related to such
searches, (ii) not adversely affect capital formation because it relates
solely to post-issuance activity, and (iii) not impose any burden on
<(32)> 15 U.S.C. 78w(a)(2).
<(33)> 15 U.S.C. 78c.
<(34)> Pub. L. No. 104-290, 106, 110 Stat. 3416 (1996).
======END OF PAGE 24======
competition not necessary or appropriate in furtherance of the Exchange
Act.
In the Proposing Release, the Commission stated its view that the
proposed Rule 17Ad-17 would not have a significant impact on transfer agent
competition. All transfer agents will be subject to the same specified
minimum standard for reasonable care in attempting to locate
securityholders with whom contact has been lost. As discussed below, the
cost of compliance with the proposed rule is minimal, and for many transfer
agents that currently conduct securityholder searches using an information
data base, the proposed rule will impose no additional cost. Because a
transfer agent's cost of compliance generally is based upon the number of
securityholders it must attempt to locate, transfer agents, regardless of
their size, should incur comparable relative costs in exercising comparable
care. On average, compliance costs should be roughly proportional to the
number of securityholder records maintained by the transfer agent.
One commenter stated that the rule as proposed could have an
anticompetitive effect because the costs could cause additional transfer
agents to abandon an already contracting market. However, this commenter
did not provide any detail as to the burden created by the rule or why such
burden should disproportionately affect certain transfer agents. The
Commission believes that the rule as adopted has been drafted so as to
provide the maximum flexibility to transfer agents to meet their
obligations in the most cost-effective manner possible. After careful
consideration of the commenter's views, the Commission has determined that
Rule 17Ad-17 will not impose any burden on competition not necessary or
appropriate in furtherance of the Exchange Act.
======END OF PAGE 25======
In the Proposing Release, the Commission estimated compliance costs to
the industry of approximately $750,000, based on an estimated cost of $3.00
per account and a total estimated 250,000 lost securityholder accounts.
Based on more recent data obtained from several large transfer agents, the
Commission has revised its cost estimate per account to $3.38 the first
year and $1.79 per account in the following years. Significantly, based on
its most recent information, the Commission now believes that there may be
as many as 3 million lost securityholder accounts. Due primarily to this
change in estimated lost securityholder accounts, the Commission's revised
estimate of the aggregate costs to the industry are one time compliance
costs of $4.6 million and annual compliance costs of $5.2 million.
The Commission received seven comment letters that provided specific
cost estimates. One commenter estimates (assuming one search and match)
that the cost of locating an account will be approximately $6.00, which
includes out-of-pocket postage, staff, and computer time. A second
commenter states that vendor prices for data base searches may vary widely
and that the actual cost per account will range from $5.00 to
$12.00.<(35)> A third commenter estimates an aggregate cost of as
much as $4.75 for each lost securityholder and total initial programming
costs of $150,000.<(36)> Two commenters estimate that charges from
<(35)> The commenter's estimates include the cost of the data
base search itself plus such items as system processing
expenses to generate the search and to receive the
matched file from the data base vendor; printing and
mailing expenses; handling and other related charges
for returned items; and expenses for replacement of
uncashed checks and lost securities.
<(36)> The estimate of $4.75 is based on postage, data base
charges, and an increase in processing staff by two
(continued...)
======END OF PAGE 26======
firms for data base searches range from $2.00 per account to approximately
$1.00 per account for tape files. Another commenter anticipates that the
costs of complying with the rule will exceed $100,000 in additional labor
costs together with software and hardware costs each year. Another
commenter estimates that the cost per account for using an information data
base ranges from less than $.10 when using a CD ROM to as much as $1.70 to
use a third party vendor data base.
The Commission believes that the estimates higher than the
Commission's estimate of $3.38 per lost account overstate the costs
involved because the figures include expenses not related to the rule or
which are required already as a part of the transfer agent's duties (e.g.,
the cost of shareholder mailings). Furthermore, the Commission believes
that compliance with the rule as it is being adopted will not require
transfer agents to incur any substantial costs with respect to additional
labor, hardware, or software because the rule's requirements regarding
coding securityholders as lost are consistent with current state
escheatment laws. Such state laws also require transfer agents to be able
to produce information on lost securityholders for annual filings with the
state, and therefore transfer agents' computer systems currently should be
capable of producing lists of lost securityholders to provide to the data
bases. Thus, the Commission believes that transfer agents' current
computer systems should not require significant changes in order to comply
with the rule.
<(36)>(...continued)
full time positions. Currently, this commenter
conducts periodic searches for its lost
securityholders.
======END OF PAGE 27======
Further, the Commission has amended the proposal so as to lower the
cost of compliance with the rule. For example, the Commission has created
a de minimis exception to the rule because searches for accounts with
lesser values would not produce as great a benefit (i.e., the cost of
locating such securityholders would be a much larger percentage of the
assets to be returned). In addition, the Commission has amended the rule
to be more consistent with current state law requirements by eliminating
the requirement that three months elapse between two mailings prior to
coding a securityholder as lost. Accordingly, the Commission is retaining
its estimate of $3.38 per account in the first year and $1.79 per account
in the following years.
The Commission believes that the cost of the rule will be outweighed
by its benefits. The rule will create a uniform standard applicable to all
transfer agents thus ensuring that all investors have the opportunity to be
reunited with their assets.<(37)> In addition, the rule will
guarantee that transfer agents make at least two attempts to locate lost
securityholders before forwarding names to a search firm that may result in
substantial charges to the securityholder. Thus, the rule should help
investors recover a greater percentage of their assets.
Based on comments received, the Commission believes that the number of
lost securityholders compared to total accounts held by transfer agents is
<(37)> Some transfer agents currently attempt to locate lost
securityholders, but the extent and type of efforts
used vary greatly among transfer agents. In some
cases, transfer agents forward the names of lost
securityholders directly to professional search firms,
in which case the securityholder must pay a fee to
regain its assets. In other cases, the transfer agent
searches for lost securityholders only if the searches
are authorized and paid for by the issuer.
======END OF PAGE 28======
small, approximately 1.34%. However, the actual dollar amount of those
assets can be significant. The Commission believes that the total value of
assets held in accounts coded as "lost" may in fact exceed $450
million.<(38)>
The Commission believes that Rule 17Ad-17 mandates a cost-effective
means for locating lost securityholders. Because of the de minimis
exception, transfer agents are not required to search for lost
securityholders unless their accounts are worth $25 or more. The
Commission believes that the rate of success for data base searches is at
least 60%.<(39)> Thus, even if every account of lost securityholders
was worth only $25, the rule would provide an average benefit of $15 per
lost securityholder account (i.e., 60% of $25). This estimated benefit is
larger than any commenter's estimate of the per account cost of data base
<(38)> The data cited in this paragraph is based on a limited
informal survey of several large transfer agents.
<(39)> The Commission staff contacted several transfer agents
to obtain an estimated success rate. Only one of the
transfer agents contacted currently uses data base
searches to find lost securityholders. That transfer
agent, which has been conducting searches on a monthly
basis for over a year, stated that its success rate
using data base searches is never less than 75% and
sometimes is as high as 94%. For purposes of the cost-
benefit analysis, the Commission is assuming a 60%
success rate in order to be conservative.
======END OF PAGE 29======
searches.<(40)> Furthermore, because the value of many accounts will
exceed $25, the Commission expects that the actual benefit will be higher.
The Commission has considered the substantial likely benefits that
investors will receive from adoption of the rule and the additional cost
the rule will impose on transfer agents. The Commission has decided to
adopt the rule given the lack of consistent standards currently in effect
with respect to lost securityholders and the relatively minor cost per
account imposed by the rule. In consideration of cost, the Commission has
designed the final rule to give transfer agents maximum flexibility to
comply with the rule's requirements and to minimize their search and
recordkeeping expenses.
Rule 17a-24 as adopted differs from the proposed rule. Because the
adopted rule requires that information be reported on a form that all
transfer agents subject to the rule are required to file, the rule should
not create an additional filing burden. In addition, the information that
the reporting transfer agents must file should be currently available to
such transfer agents.<(41)> Thus, because the rule should not create
any significant costs to transfer agents, the Commission has determined
<(40)> One commenter stated that the per account cost could be
as high as $12.00. However, as discussed above, the
Commission believes that this estimate includes many
costs not created by the rule. Also, as noted above,
the Division of Market Regulation estimates the average
cost of data base searches required by the rule will
total only $3.38 per account in the first year and
$1.79 per account in the following years.
<(41)> Transfer agents must record which of their
securityholders are lost and the date that such
securityholders become lost in order to comply with
state escheatment laws.
======END OF PAGE 30======
that Rule 17a-24 will not impose any burden on competition not necessary or
appropriate in furtherance of the Exchange Act.
In addition, the Commission believes that the benefits of the rule
justify the costs. The benefits of the rule are to provide the Commission
with information to determine whether transfer agents are more successful
in locating lost securityholders and, therefore, whether Rule 17Ad-17 is
effective. The costs of compliance with Rule 17a-24 should be limited to
the costs involved in compiling the information required to be reported
once a year.
V. PAPERWORK REDUCTION ACT
As set forth in the Proposing Release, Rule 17Ad-17 and Rule 17a-24
contain collections of information within the meaning of the Paperwork
Reduction Act of 1995 ("PRA").<(42)> Accordingly, the collection of
information requirements contained in the rules and related amendments were
submitted to the Office of Management and Budget ("OMB") for review and
were approved by OMB which assigned the following control numbers: Rule
17Ad-17, control number 3235-0469; and Rule 17a-24, control number 3235-
0470.<(43)> The collection of information requirements are in
accordance with Section 3507 of the PRA.<(44)> An agency may not
conduct or sponsor and a person is not required to respond to a collection
of information unless the agency displays a valid OMB control number.
<(42)> 44 U.S.C. 3501 et seq.
<(43)> Rule 17Ad-7 was previously submitted to OMB, which
approved the rule and assigned the following control
number 3235-0136.
<(44)> 44 U.S.C. 3507.
======END OF PAGE 31======
The collections of information under Rule 17Ad-17, Rule 17a-24, and
Rule 17Ad-7 are mandatory. As described in more detail above and in the
Proposing Release, the collections of information are necessary to enable
recordkeeping transfer agents, as the usual custodians of the records that
determine the ownership of securities and the entitlement to corporate
distributions, to reduce significantly the number of lost securityholders
and for the Commission to monitor compliance with the rule. The Commission
may review this information during periodic examinations or with respect to
investigations. The records required to be filed with the Commission and
any records required to be kept pursuant to these rules that are requested
by and submitted to the Commission will be kept confidential to the extent
permitted by the Freedom of Information Act<(45)> and the Privacy Act
of 1974.<(46)>
Based upon further review of the disclosure and recordkeeping changes
required by Rule 17Ad-7, the Commission is retaining its burden estimates
for the collection of information under that rule. Thus, the description
and estimated burden of the collection of information requirement under
Rule 17Ad-7 have not changed and are set forth in the Proposing Release.
Originally, the Commission estimated compliance costs of Rule 17Ad-17
to the industry of approximately $750,000, based on an estimated cost of
$3.00 per account and a total estimated 250,000 lost securityholder
accounts. Based on comments received questioning the Commission's original
burden estimate, the Commission obtained more recent data from several
large transfer agents. As a result, the Commission has revised its cost
<(45)> 5 U.S.C. 552.
<(46)> 5 U.S.C. 552a.
======END OF PAGE 32======
estimate per account to $3.38 the first year and $1.79 per account in the
following years. Significantly, based on its most recent information, the
Commission now believes that there may be as many as 3 million lost
securityholder accounts. Due primarily to this change in estimated lost
securityholder accounts, the Commission's revised estimate of the aggregate
costs to the industry are one time compliance costs of $4.6 million and
annual compliance costs of $5.2 million.
Due to the changes in Rule 17a-24 as adopted and the corresponding
changes on Form TA-2, the Commission will be resubmitting its collection of
information requirement to OMB for review and approval.
VI. STATUTORY BASIS
Pursuant to Section 17A(d)(1) of the Exchange Act, 15 U.S.C. 78q-
1(d)(1), the Commission amends Rule 17Ad-7 and Form TA-2 and adopts Rule
17Ad-17 and Rule 17a-24 in Chapter II of Title 17 of the Code of Federal
Regulations.
List of Subjects in 17 CFR Parts 240 and 249
Reporting and recordkeeping requirements; Securities; Transfer agents
Text of the Amendments
For the reasons set out in the preamble, the Commission amends Title
17, Chapter II of the Code of Federal Regulations to read as follows:
PART 240 -- GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934
1. The authority citation for Part 240 continues to read in part as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 78l, 78m, 78n,
======END OF PAGE 33======
78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23,
80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
2. By adding 240.17a-24 to read as follows:
240.17a-24 Reports of lost securityholders.
(a) Each recordkeeping transfer agent shall file with the Commission
on Form TA-2 (17 CFR 249b.102) the following aggregate information with
respect to lost securityholder accounts contained on such transfer agent's
master securityholder files:
(1) The total number of lost securityholder accounts and the
percentage of lost securityholder accounts compared to total number of
accounts contained on the transfer agent's master securityholder files.
(2) The information required by paragraph (a)(1) of this section
shall be provided separately for securityholders lost one year or less,
three years or less, five years or less, and more than five years and for
securityholders whose assets which have escheated to unclaimed property
administrators within the last calendar year.
(b) For purpose of this section, lost securityholder means a
securityholder:
(1) To whom an item of correspondence that was sent to the
securityholder at the address contained in the transfer agent's master
securityholder file has been returned as undeliverable; provided, however,
that if such item is re-sent within one month to the lost securityholder,
the transfer agent may deem the securityholder to be a lost securityholder
as of the day the re-sent item is returned as undeliverable and
======END OF PAGE 34======
(2) For whom the transfer agent has not received information regarding
the securityholder's new address.
3. Section 240.17Ad-7 is amended by adding paragraph (i) to read as
follows:
240.17Ad-7 Record retention.
* * * * *
(i) The records required by 240.17Ad-17(c) shall be maintained for a
period of not less that three years, the first year in an easily accessible
place.
4. Section 240.17Ad-17 is added to read as follows:
240.17Ad-17 Transfer agents' obligation to search for lost
securityholders.
(a)(1) Every recordkeeping transfer agent whose master securityholder
file includes accounts of lost securityholders shall exercise reasonable
care to ascertain the correct addresses of such securityholders. In
exercising reasonable care to ascertain for its master securityholder file
such lost securityholders' current addresses, each recordkeeping transfer
agent shall conduct two data base searches using at least one information
data base service. The transfer agent shall search by taxpayer
identification number or by name if a search based on taxpayer
identification number is not reasonably likely to locate the
securityholder. Such data base searches must be conducted without charge
to a lost securityholder and with the following frequency:
(i) Between three and twelve months of such securityholder becoming a
lost securityholder and
======END OF PAGE 35======
(ii) Between six and twelve months after the transfer agent's first
search for such lost securityholder.
(2) A transfer agent may not use a search method or service to
establish contact with lost securityholders that results in a charge to a
lost securityholder prior to completing the searches set forth in paragraph
(a)(1) of this section.
(3) A transfer agent need not conduct the searches set forth in
paragraph (a)(1) of this section for a lost securityholder if:
(i) It has received documentation that such securityholder is deceased
or
(ii) The aggregate value of assets listed in the lost securityholder's
account, including all dividend, interest, and other payments due to the
lost securityholder and all securities owned by the lost securityholder as
recorded in the transfer agent's master securityholder files, is less than
$25; or
(iii) The securityholder is not a natural person.
(b) For purposes of this section:
(1) Information data base service means either:
(i) Any automated data base service that contains addresses from the
entire United States geographic area, contains the names of at least 50% of
the United States adult population, is indexed by taxpayer identification
number or name, and is updated at least four times a year; or
(ii) Any service or combination of services which produces results
comparable to those of the service described in paragraph (b)(1)(i) of this
section in locating lost securityholders.
(2) Lost securityholder means a securityholder:
======END OF PAGE 36======
(i) To whom an item of correspondence that was sent to the
securityholder at the address contained in the transfer agent's master
securityholder file has been returned as undeliverable; provided, however,
that if such item is re-sent within one month to the lost securityholder,
the transfer agent may deem the securityholder to be a lost securityholder
as of the day the re-sent item is returned as undeliverable; and
(ii) For whom the transfer agent has not received information
regarding the securityholder's new address.
(c) Every recordkeeping transfer agent shall maintain records to
demonstrate compliance with the requirements set forth in this section
which shall include written procedures which describe the transfer agent's
methodology for complying with this section.
PART 249b -- FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934
5. The authority citation for Part 249b continues to read in part as
follows:
15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
Note: Form TA-2 does not and the amendments will not appear in the Code of
Federal Regulations.
6. Form TA-2 (referenced in 249b.102) is amended by adding
paragraph 8 to Instruction I.A. to read as follows:
Form TA-2
* * * * *
I. General Instruction for Filing and Amending Form TA-2.
A. * * *
======END OF PAGE 37======
8. "Lost securityholder" is defined in Rule 17a-24(b)(1) (17 CFR
240.17a-24(b)(1)).
* * * * *
7. Form TA-2 (referenced in 249b.102) is amended by adding
paragraph c to Question 4 to read as follows:
Form TA-2
* * * * *
4. * * *
c. (i) Number of lost securityholder accounts and (ii) percentage of
total accounts represented by lost securityholder accounts as of June 30
for:
Accounts of securityholders lost one year or less:
Accounts of securityholders lost three years or less:
Accounts of securityholders lost five years or less:
Accounts of securityholders lost more than five years:
Accounts of securityholders which have escheated to states within the
year ended June 30:
* * * * *
By the Commission.
Jonathan G. Katz
Secretary
Dated: October 1, 1997
======END OF PAGE 38======