Many investors are unaware that states can take control of their investments if they are deemed abandoned. This can happen even if the investor is still receiving statements and dividends.
Unclaimed-Property Laws
Over the last few years, states have been rewriting unclaimed-property laws to make it easier for them to take control of abandoned investments. This has resulted in a shorter timeframe for investments to be considered abandoned, with some states now considering investments abandoned after just three years of inactivity.
Computershare, one of the country’s largest stock transfer agents, has warned investors that merely receiving statements or having dividends automatically deposited may not be enough to prevent their investments from being considered abandoned.
Consequences for Investors
If an investment is considered abandoned, the state can take control of it and sell it. The investor may then receive the proceeds from the sale, but they will not receive the investment itself or any potential future appreciation in value.
For example, Jan Peters, a German citizen, had his Amazon shares taken by the state of California after they were deemed abandoned. The state sold the shares for $1.6 million, but by the time Peters was able to reclaim the proceeds, the shares would have been worth over $4.2 million.
Reasons Behind the Changes
States argue that these changes are necessary to protect consumers and reunite them with their lost investments. However, critics argue that the changes are driven by a desire to generate revenue for the state.
In some cases, states have been candid about the financial benefits of shortening the timeframe for investments to be considered abandoned. For example, the Texas Legislative Budget Board estimated that shortening the dormancy period for certain investments would result in a one-time gain of $72 million for the state’s General Revenue Fund.
Reforms and Concerns
Some states, such as Florida, are moving in the opposite direction, restoring returned mail or failed electronic communication as a trigger for securities and extending the owner-inactivity period from three years to 10 years in certain circumstances.
Meanwhile, regulators have documented cases where the systems for handling abandoned investments have failed, resulting in investors losing control of their investments.
Original reporting: Fox News (HLL/CB) — read the source article.
