There are five basic steps to the escheatment process:
- Analyze shareholder records annually, according to each state's or jurisdiction's criteria and timetable, to identify properties that are deemed eligible for escheatment.
- Conduct mailings (if required) in a last-ditch effort to locate or make contact with those shareholders.
- Reconcile responses and prepare the final reports in the appropriate format that each state requires.
- File the reports in a timely manner.
- Deliver any cash or shares due to the states in a timely manner.
An ounce of prevention
A good transfer agent will do more than just manage the operations of escheatment. They will be proactive in preventing it. Implementing quality control checks and conducting top level searches to find lost shareholders or to locate unresponsive payees should be part of every record keeper's annual duties. More in depth research on deceased accounts may or may not be part of companies’ standard contracts. Depending on the size of the shareholder base and their changing demographics, companies may require specialized programs to address specific issues within their share base.
Acting on your behalf
It is also the responsibility of the transfer agent to stay on top of any legislative changes. State laws govern the escheatment process, and they can (and do) change all the time. An experienced transfer agent will immediately understand the impact to their clients and offer expert advice. They will also bring in legal experts and consultants to advocate, when necessary, with the states or SEC on their clients' behalf.
Most corporations know very little about the escheatment process, and, what they do know, they assume their transfer agent is handling. It's true – your record keeper may be responsible under your contract with them for carrying out the process, but you, the issuer, are ultimately liable for anything that might go wrong or get missed. For that reason, you should make sure you understand the basic procedures involved.