5 Tips to Avoid Escheatment for Issuers

It is important for companies to do everything they can to help shareholders avoid the escheatment of their assets. Escheatment is something that takes place when public companies and securities issuers have not had any contact with shareholders over a set period of time. Under this law, states have the right to claim uncashed checks and securities, converting them to cash. Then, the state has the right to keep that cash until the shareholder is able to reclaim the funds. Some states recognize reclaimed funds as revenue. Now, states have become more aggressive in their escheatment practices, potentially costing shareholders millions of dollars. Fortunately, there are a few escheatment tips that companies can follow to help their shareholders avoid securities escheatment and the escheatment of stocks.

1. Pay All Dividends Through ACH

One of the first ways companies can help their shareholders avoid escheatment is to pay all dividends through ACH. One of the most common reasons why escheatment takes place is that shareholders do not cash their dividend checks. If they do not do this, checks and associated stocks may be escheated. One of the ways to avoid dealing with uncashed dividend checks is to pay dividends through ACH transfer instead.

2. Contact Shareholders at Least Once per Year

It is important for companies to contact their shareholders at least once per year. That way, companies stay in contact with their shareholders, reminding them of important steps they need to take to avoid the escheatment process. For example, this might be a good opportunity to remind shareholders that they need to cash any dividend checks that were sent to them.

3. Have Shareholders Log In to Their Transfer Agent Account at Least Once per Year

The escheatment process can only take place after a set period of dormancy in the account. Therefore, one of the easiest ways to avoid the escheatment process is to prevent the account from going dormant. It is helpful for issuers to remind their shareholders to log into their transfer agent account at least once per year. That way, it is possible to stop or reset the dormancy clock, preventing escheatment from taking place. Shareholder-initiated contact can reset the dormancy escheatment clock to day zero.

4. Request Additional Information for Lost Shareholder Searches

Prior to escheatment, it is also possible for issuers to do an in-depth deep search to find lost shareholders as well as the owners of any unclaimed property. Transfer agents should have records to comply with all lost shareholder and escheatment regulations. Issuers should reach out to their transfer agent to conduct lost shareholder searches. Your transfer agent is required to conduct such searches regularly under SEC rules, so this is the easiest way to kill two birds with one stone. If your transfer agent isn’t doing this for you, please reach out to us and we can help you manage this process and protect your shareholders.

5. Remind Investors To Update Their Information

Issuers should also remind their investors to update their contact information regularly. It can be difficult for companies to remind their shareholders to remain active if they don’t have the right contact information. Companies need to let their shareholders know to keep their contact information current with the transfer agent. This includes email addresses, physical addresses, and phone numbers. Furthermore, the issuer should also collect all investor information at the time of the initial investment. That way, they can reach out to investors from time to time to remind them to avoid getting wrapped up in the escheatment process.


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