December 14, 1989
TO: CLOSED-END FUND COMMITTEE NO. 52-89
OPERATIONS COMMITTEE NO. 25-89
SEC RULES COMMITTEE NO. 77-89
UNIT INVESTMENT TRUST COMMITTEE NO. 84-89
AD HOC COMMITTEE ON UNCLAIMED PROPERTY
RE: JANUARY 12 MEETING TO DISCUSS UNCLAIMED PROPERTY LAWS
__________________________________________________________
We have scheduled a meeting for January 12 at the Institute
to discuss unclaimed property laws generally and, specifically,
to discuss what action should be taken in response to the amended
New York Abandoned Property Law.
As we previously informed you, last summer New York amended
its Abandoned Property Law with respect to dividend reinvestment
plans. (See Memorandum to SEC Rules Members No. 53-89, Unit
Investment Trust Members No. 50-89 and Closed-End Fund Members
No. 45-89, dated October 3, 1989). In summary, the new law
provides that shareholder accounts participating in a fund's
dividend reinvestment plan, the owners of which have not had any
affirmative written contact with the fund for 5 years, will be
deemed abandoned by the state. In contrast, the old law did not
cover shareholder accounts which participated in dividend
reinvestment plans on the basis that the reinvestment of the
dividends constituted sufficient activity with the fund.
Moreover, the old law required the return by the post office of
corporate notices to shareholders as an element of abandonment.
This requirement was eliminated under the new law. A copy of the
old New York law and the amendments thereto are attached as
Appendix A and B, respectively.
It is urgent that action be taken to prevent New York from
collecting funds under the new law. In addition, it is important
to persuade New York to modify its new law in a more reasonable
manner before other states adopt similar provisions. There are
several available courses of action for accomplishing this which
will be discussed at the meeting. First, a lawsuit could be
initiated challenging the constitutionality of the amended law.
Second, a lobbying effort could be made to persuade the New York
legislature to repeal the new law and to adopt, in its stead, a
bill modeled on the securities provision of the Uniform Unclaimed
Property Act of 1981. The Institute was instrumental in drafting
that provision, which contains a general rule and a specific rule
for dividend reinvest accounts. The Uniform Act contains a
broader definition of what constitutes sufficient communication
with the fund to prevent the account from being deemed abandoned.
In addition, the Uniform Act only applies to dividend
reinvestment plans if the shareholder has another account which
does not participate in such a plan and which has been deemed
abandoned. A copy of the securities provision of the Uniform Act
is attached as Appendix C. In connection with this second
approach, a shareholder campaign could be mounted by members
urging their New York shareholders to write to their state
representatives to support repeal of the new provision and
adoption of the Uniform Act provision.
In addition, it is important that you begin implementing
procedures for maintaining records of shareholder communications,
such as proxies, and for locating "lost" shareholders. We will
discuss suggested procedures at the meeting. Also, attached as
Appendix D is a memorandum describing various methods that
Institute members have used to locate shareholders.
The January 12 meeting is scheduled for 10:00 a.m. Please
contact Nancy Inman at 202/955-3515 by January 5 to let her know
whether you will be able to attend the meeting .
Amy B. Rosenblum
Assistant General Counsel
Attachments