What You Can Do to Protect Yourself

Everyone with a financial account is at risk of a state claiming their account. The most important thing you as a mutual fund shareholder can do to protect your account from being considered lost is to contact the financial institution holding your mutual fund shares at least once every three years. To get in the habit of regularly contacting your financial institutions, consider making such contact at the same time each year—for example, on your birthday, on a particular holiday, or during tax season. This will keep you from being deemed a “lost” shareholder and having your account taken by a state.

Find Your “Lost” Mutual Fund Accounts and Other Financial Assets

Mutual fund shareholders should visit the National Association of Unclaimed Property Administrators to find out if a state is holding any of your financial assets or other property. You can search for “lost” accounts or property nationwide or state by state. Once you identify “lost” property, it is up to you to contact the state to claim it.

Escheatment Laws and Mutual Funds: An Overview

Mutual funds communicate with their shareholders regularly via first-class mail. When any first-class mailing sent to a shareholder is returned to the fund as undeliverable, federal law requires the mutual fund to search for the account owner. If the fund cannot find the owner, after a period of time, state “escheatment” laws require that the account be turned over to the state in which the shareholder resides. In recent years, states have begun to revise their laws to make it easier to deem accounts “lost” or “abandoned,” and claim the proceeds sooner.

Depending on the state laws, a shareholder is considered “lost” if:

  1. First-class mail sent to the shareholder (such as an account statement) is returned to the mutual fund as “undeliverable;” and/or
  2. The shareholder has failed to have contact with the mutual fund (or other financial institution, such as a broker-dealer holding an account) for a specified period of time (in many states, this period is as short as three years). “Contact” in this context generally means that the shareholder has called, emailed, or sent correspondence (for example, voting a proxy) to the mutual fund.

Once a state claims an account, it typically liquidates it and uses the proceeds to shore up budget gaps. To reclaim an account, a shareholder must contact the state holding the proceeds to claim it. Unfortunately, when a shareholder gets her mutual fund account back, she gets only the value of the account at the time that the state liquidated it—losing all of the growth from interest, dividends, or market appreciation since the liquidation.

Consequently, it’s very important that shareholders maintain regular contact with their financial institutions to protect themselves from the adverse consequences of these state laws. If you hold mutual fund shares through a broker-dealer, you must contact the broker-dealer to protect your interests.

ICI and the Fund Industry Are Taking Action to Educate and Protect Shareholders

ICI has been working with its members to develop industry protocols to track shareholder contact on mutual fund accounts. Mutual funds voluntarily contact shareholders who have not had recent contact with the fund. Through this outreach, fund managers are alerting their shareholders of the need to affirmatively contact the fund company, because such contact will protect the account from being claimed by a state.

In addition, ICI is working with the states to address its concerns regarding state abandoned-property laws, to better protect mutual fund shareholders.