What Is On Our Policy Agenda?

Presented by:

Karen Anderson, Senior Mgr. - KPMG, LLP

William King, Senior Mgr. – KPMG, LLP

Sara Lima, Partner – Reed Smith

Diann Smith, Counsel – McDermott, Will & Emery

Dana Terry, Sr. Regulatory Compliance Analyst –

DST Systems, Inc.

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UPPO Presentation Disclaimer

Use of the Unclaimed Property Professionals Organization, Inc., (UPPO) name of copyrighted

materials in this presentation does not constitute an endorsement by UPPO of a member, vendor, product or service. The content represents the

opinion of the author and not necessarily those of UPPO. This information is not intended as legal

advice and should not be used to replace the advice of legal counsel.

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UPPO Antitrust StatementUPPO has a policy of strict compliance with federal antitrust laws.

UPPO members and/or meeting attendees cannot come to understandings, make agreements, or otherwise concur on positions or activities that in any way tend to raise, lower or stabilize prices or fees. Members and/or attendees can discuss pricing models,

methods, systems, and applications, as well as certain cost matters that do not lead to an agreement or consensus on prices or fees to be charged. However, there can be no

discussion as to what constitutes a reasonable, fair or appropriate price or fee to charge for any service or product.

Information may be presented with regard to historical pricing activities so long as such information is general in nature and does not include data on current prices or fees being

charged in any trade area. Any discussion of current or future prices, fees, discounting, and other terms and conditions of sale, which may lead to an agreement or consensus on prices

or fees to be charged, is strictly prohibited.

Any questions about UPPO’s antitrust policy should be directed to UPPO’s Executive Director.

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Disclaimer

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The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

Today’s Agenda

• Introduction: GRAC, the survey & issue selection

• The Revised Uniform Unclaimed Property Act and UPPO’s Participation

• UPPO’s Amicus Curiae Brief pertaining to Delaware v. Pennsylvania and Arkansas v. Delaware

• Pennsylvania’s Surprise Legislation: HB 1605• Nevada Issues and Advocacy

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IntroductionThe Government Relations and Advocacy Committee (“GRAC”)

• GRAC’s mission

• GRAC’s composition

• How GRAC works• Monthly meetings

• Issue Task Forces

• Research and White Papers

• The Survey and Issue Selection

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UPPO RUUPA Advocacy Issues

1. Defensive Positions

a. Definition of Security• Provides definition previously lacking

• Clarification suggested for broker dealer accounts

b. Presumption of Abandonmenti. when property presumed abandoned

• Promotes consistency and clarity

• Clarification suggested for owner-generated activity complete rebuttal

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UPPO RUUPA Advocacy Issues

Defensive Positions (cont.)ii. Presumption of Abandonment: Tax-Deferred

Retirement/HSAs and Presumption of Abandonment: Other Tax Deferred Account

• Protects owners

• Requests specific ERISA preemption language

iii. DMF Matching for Securities

• No express requirement

• Request addition of “ordinary course of business”

iv. Custodial Account for Minors

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UPPO RUUPA Advocacy Issues

Defensive Positions (cont.)v. When Security Presume Abandoned

• Compliance with SEC Rule 17Ad-17

vi. When Related Property Interest Presumed Abandoned

• Clarification needed re underlying shares

c. Indication of Apparent Owner Interest in Property – Contact

i. Vast improvement over 1995 Act – greater array of contact types

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UPPO RUUPA Advocacy Issues

Defensive Positions (cont.)v. Reporting Non-Transferable Securities

vi. Public Sale of Property

• Lower dormancy period in exchange for state holding securities for minimum of three years

vii. Recovery of Securities Value by Owner

• Owner made whole up to six years

viii. Complaint to Administrator/Review Process and Judicial Remedy

• General Strong Support

• Request requirement of de novo review

• Hearing officer selection request

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UPPO RUUPA Advocacy Issues

2. Offensive Positions

a. Definition of Holder• Make clear only one holder – see Comments

• Provide basis for determining holder

b. Foreign Transactionsi. Foreign property provisions violate constitutional law

• Promotes consistency and clarity

• Not consistent with federal priority rules

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UPPO RUUPA Advocacy Issues

2. Offensive Positions (cont.)a. Rules for Taking Custody

• Language is confusing, poorly drafted, potentially unconstitutional, likely in conflict with federal priority rules

• Retains watered-down third priority rule• Conflict with legislative action removing property type• Insured versus beneficiary

b. Record Retention, Statute of Limitations, Use of Estimation

i. Record Retention• General support – but should be shorter consistent with

federal tax rules

ii. Statute of Limitations -- Support

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UPPO RUUPA Advocacy Issues

2. Offensive Positions (cont.)iii. Use of Estimation

• Require state guidance on appropriate estimation techniques

• State must provide standard for defining insufficient records

c. B2B Exemption (lack there of)

d. Derivative Rights Doctrine

i. Support ABA and others that RUUPA should acknowledge and reinforce doctrine

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Delaware v. PennsylvaniaArkansas v. Delaware

UPPO’s Amicus Brief in the Supreme Court of the United States

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Case Background

• Moneygram “official checks” • Escheated to Delaware as its state of inc. (2nd priority)• Federal law – money orders go to place of purchase

SO: Are “official checks” money orders?• 20 State TSG audit commenced

> $150 million at issue (4 years worth)• PA sues DE and then DE sues PA and then AR sues DE• Over 20 other states hopped aboard• PA has requested the Court to reevaluate 2nd priority

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Amicus Brief Goals

1. Encourage Court to hear the case

2. Present holders’ perspective

3. Weigh in on the question: Is the second priority rule still good law?

4. Ask for clarification: Can holders raise the priority rules as a defense against states?

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UPPO’s Amicus Brief Highlights

• State dependence on revenue & “seismic shift” in collections

• State credit ratings dependent on unclaimed property

• Third-party contingent fee audits & burdens to holders

• Expansive state interpretations of the law: • Estimation, shortened dormancy, foreign-owned

property, “third” priority rule

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UPPO Amicus Brief Requests

UPPO asked the Court to clarify:

• States cannot create new priority rules;

• Holders can raise the priority rules as a defense against states

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Next Steps

• Stipulation of facts due February 4, 2017.• If filed, the case will proceed directly into

briefing.

• Could be resolved by the end of 2017.

• If no stipulation of facts, the Court will appoint a special master to conduct discovery and issue a preliminary recommendation.

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Thanks to:

Co-Authors:

• John Coalson

• Ethan Millar

• Diann Smith

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Pennsylvania H.B. 1605

• Passed July 13, 2016

• Effective September 11, 2016

• Section 1301.8 Property Held by Agents-In-Fact or Fiduciaries

• Section 1301.10A Notice Given by Holder

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PA HB 1605:Section 1301.8

• Revises the presumption of abandonment for retirement accounts

• Removes the requirement for the owner to attain 70.5 years of age

• Requires the escheat of retirement plans 3 years after the holder has lost contact with the owner unless there has been certain types of contact/activity

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PA HB 1605: Lost Contact

• Section 1301.8(B) – The date in which a holder has lost contact with the owner is:

• The date of the 2nd RPO (if sent within 30 days); OR

• The date the 1st communication is returned if the second communication was made more than 30 days from the 1st communication

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PA HB 1605: Owners Receiving E-Delivery

• Electronic communication no later than 2 years after the last indication of interest

• 30 days to respond before sending a First Class communication

• If First Class mail is returned, the holder is deemed to have lost contact with the owner on the date of last indication of interest

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PA HB 1605:Section 1301.10A

• New due diligence requirements

• Not more than 120 days nor less than 60 days from report due date

• Not required if the holder has an invalid address for the owner

• Send for property valued at $50 or more

• Send First Class Mail, unless the owner has previously agreed to e-Delivery

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Section 1301.10A

• Due Diligence Letter should include:

• Description of property

• Description of property ownership

• Value of property, if known

• Holder contact information to prevent the escheatment of property

• Holder must include an affirmation of compliance

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PA HB 1605 & UPPO’s Quest for Clarity and Guidance

• Initial outreach letter to Legislative Leaders and Treasurer (September, 2016)

• Meeting with Treasurer’s Chief Counsel and UP Administrator (October 2016)

• Receipt of “Draft Guidance” (November 2016)

• Comment letter on “Draft Guidance” plus suggested guidance summary and “Q & A” drafted and sent to Treasurer’s Chief Counsel and UP Administrator (December 2016)

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Nevada Issues and Advocacy

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Nevada Consolidated Reporting Prohibition

• Rationale

• Solutions

• UPPO Efforts

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Nevada Penalty & Interest Assessments

• $5000 penalty

• Interest charges

• New Review and Waiver Consideration Policy

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Nevada Treatment of Service Providers

• On line Upload Authorization Requirements

• Lack of Direct Discussions with or Notification of Service Providers

• Duplicative/Redundant Holder Reporting Registration

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Nevada: UPPO’s Outreach

• Letters to and Discussions with the State Treasurer and Administrators

• Information sharing among key industry groups and leaders

• Reconsideration and implementation of strategic outreach efforts

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Q & A

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Thank You!Thank You!

• Your Presenters:

– Karen Anderson,

KPMG, LLP

– William King,

KPMG, LLP

– Sara Lima,

Reed Smith

– Diann Smith,

McDermott, Will & Emery

– Dana Terry,

DST Systems, Inc.

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