Escheatment
When personal property, including securities, is unclaimed for several years, typically three to five years, state laws permit states to “escheat” or take the abandoned property. This process originated in feudal England and referred to land claims that reverted to the Crown in the event there was no heir to a feudal estate. Today, states can take control of and sell property that has been deemed to be abandoned.
Abandoned accounts or securities may be identified when statements or checks are returned to the sender as “undeliverable” or even simply after a period of inactivity. However, criteria for determining whether property has been abandoned vary from state to state. Generally, states require the property holder to make a good faith effort to find the owner before declaring a property to be “dormant.”
In the securities industry, if an item of correspondence is returned as undeliverable, then the SEC’s