February 14, 1990
TO: MEMBERS - ONE PER COMPLEX NO. 5-90
ABANDONED PROPERTY TASK FORCE
RE: NEW YORK ABANDONED PROPERTY LAW
__________________________________________________________
As we previously informed you, New York State has amended
its Abandoned Property Law with respect to mutual fund dividend
reinvestment accounts (see Memorandum to SEC Rules Members No.
53-89, Unit Investment Trust Members No. 45-89 and Closed-End
Fund Members No. 45-89, dated October 3, 1989).
This memorandum summarizes the new law, discusses actions
taken by the Institute and suggests steps which mutual fund
organizations should take as soon as possible. Specifically, we
request that you write to your New York shareholders to (1)
obtain their written confirmation that their accounts are not
abandoned; and (2) urge that they write to New York State
officials in support of corrective legislation.
The New York Law
Under the new law, the account of a shareholder
participating in a dividend reinvestment plan will be deemed
abandoned if the shareholder neither makes additions or
withdrawals, nor communicates in writing with the fund, for five
years. Abandonment will be deemed to occur even if the
shareholder reinvests dividends and even if notices sent to the
shareholder are not returned by the post office. The New York
law applies to shareholders resident in New York State, even if
the fund is not located or incorporated there.
The law requires that funds notify by certified mail
shareholders whose shares will be deemed abandoned by September
30 of the year preceding the calendar year in which the
1
*/ The law also requires that a notice be sent to shareholders
who do not have dividend reinvestment accounts and who have not,
for five years, (i) made additions or withdrawals, (ii) received
amounts paid by the fund (i.e., have not cashed dividend checks),
or (iii) communicated in writing with the fund.
shares will be turned over to the State. */1 The first such notice
was to have been sent to shareholders by September 30, 1989.
If shareholders do not either sign for receipt of the
certified notice or otherwise communicate in writing with the
fund, the shares are to be reported to the State as abandoned by
March 10 of the following year. Under the new law, this report
would cover dividend reinvestment accounts with respect to which
the shareholder has not made any additions or withdrawals or
communicated in writing with the fund during 1985-1989.
Institute Action
The revised New York law and other states' abandoned
property laws were discussed at a recent meeting of Institute
members. At that meeting, a consensus was reached that the
Institute should seek a modification of the New York law. A
bill, S.6887/A.9300, which would amend the law to precondition
abandonment on a return mail requirement, has been introduced in
The New York State Legislature.
Action Requested
You should write your New York shareholders with dividend
reinvestment accounts who have not made additions or withdrawals,
or communicated in writing with the fund, during the past 5 years
in order to obtain their written confirmation that their accounts
are not abandoned. (However, since many funds may not have
easily retrievable records, you may want to contact all New York
shareholders with dividend reinvestment accounts.) This letter
would notify shareholders of the change in the law and request
that they contact the fund in writing to ensure that their
accounts are not abandoned, such as by returning an enclosed
card.
In addition, the Institute is recommending that this letter
also request that shareholders write to state officials in
support of S.6887/A.9300. New York counsel has advised us that
S.6887/A.9300 will stand a better chance of enactment if New York
shareholders contact New York State officials to express support
for this bill.
A draft of a letter to shareholders is attached. We have
also attached a list of "talking points" that you could provide
to shareholders to use in their letters to state officials.
If you have any comments or questions regarding this issue,
please contact me at 202/955-3523.
Amy B. Rosenblum
Assistant General Counsel
Attachments
Write to the following Senators in support of S.6887 at
The New York State Senate, Albany, NY 12247
o Christopher J. Mega (sponsor of the bill;
Brooklyn)
o Tarky Lombardi, Jr. (Onondaga County)
o Ralph J. Marino (Nassau County)