Financial services firms are concerned that states have gotten too aggressive in grabbing unclaimed investment accounts.
Every state has laws about when companies and other entities have to turn over unclaimed property to the state. Banks, insurance companies and securities firms are a common source of these unclaimed assets.
The policy goal is to have states take custody of abandoned assets—a process known as “escheatment”—which then makes it possible for rightful owners to find the lost property.
(People can search for unclaimed property and accounts through a multi-state search engine, www.missingmoney.com, run by the National Association of Unclaimed Property Administrators.)
But aggressive audits and a desire to bolster state tax coffers may be causing some states to pressure firms to turn over abandoned property prematurely.
A former client of Ted Turner, an independent registered rep in Osterville, Mass., is a case in point.
Turner, who is serving as executor of the now-deceased client’s estate, claims that in September 2014 Federated Investors took the entire $26,774 balance from the client’s money fund and turned it over to the state of Washington—without calling the client or getting returned mail.
The client, Margaret Harris of Bellingham, Wash., who was age 93 at the time and still living in her own home, had maintained the account since 1983, Turner says in an arbitration claim against Federated. Harris died in February 2016.
The state of Washington has since returned $23,000 net, after incurring $3,800 in liquidation costs. Turner wants the rest of the money plus legal costs from Federated, which he claims failed to perform adequate due diligence before escheating Harris’s property.
“It’s not a lot of money,” Turner says. “It’s more the principle of the thing.”