Proposed legislation to streamline California\u2019s ability to seize abandoned stocks and mutual funds is drawing opposition from business groups and dividing Democratic lawmakers. <\/p>\n
State Controller Malia Cohen sponsored Assembly Bill 1447, which seeks to define the process for California to take custody of securities when the owner is deemed absent.<\/p>\n
Under current law, securities are declared abandoned and able to be confiscated by the state if the owner hasn\u2019t logged onto an account, or shown an interest, such as inquiring about their holding, for three years. <\/p>\n
AB 1447 adds new language that includes the requirements for escheatment, the transfer of assets to the state, are that \u201can owner does not respond to the notice\u201d sent by the securities holder, either by mail or electronically, about their asset.<\/p>\n
Cohen\u2019s office said in a statement that its bill \u201cclarifies existing law and establishes a consistent, common-sense standard for determining whether an owner remains connected to a securities account.\u201d<\/p>\n
At least one Democratic lawmaker and several securities companies want any new law to state that securities holders tried to contact the owner through the U.S. Postal Service, and, the mail was returned as undeliverable, which Cohen\u2019s office opposes including in the measure.<\/p>\n
The state has some $15 billion in unclaimed property, including securities, such as stock holdings, mutual funds, and retirement accounts.<\/p>\n
The state holds seized securities for 18 months, at which point they are required to be sold and the proceeds transferred into the state\u2019s general fund. They can be returned the owner after a detailed application process. <\/p>\n
Assembly Bill 1447, authored by Assemblymember Mike Gipson (D-Carson), is expected to be heard in the Senate Judiciary Committee in the coming days. <\/p>\n
In an Aug. 11 letter to state Sen. Tom Umberg, chair of the Senate Judiciary Committee, Investment Company Institute, a trade group for the asset management companies, argued AB 1447 would make it easier for the state to seize property. <\/p>\n
ICI wrote that Florida enacted a measure and \u201cprematurely\u201d allowed over $1 billion in securities to escheat to the state. <\/p>\n
\u201cIf AB 1447 is enacted, California would repeat the Florida mistake and become the most aggressive state in the country for escheating securities,\u201d said the letter, which was also signed by the California Chamber of Commerce and other business groups.<\/p>\n
A bill to require the \u201creturn to post office\u201d standard, sponsored by ICI and authored by Assemblymember Cottie Petrie-Norris (D-Irvine), died in the Senate Appropriations Committee earlier this month. <\/p>\n
An analysis by the Senate Appropriations staff predicted a loss of up to $735 million to the general fund in the short-term under Pettrie Collins\u2019 bill. ICI disagrees with analysis, arguing the bill would have had a negligible impact on state revenue.<\/p>\n
ICI also takes the position that existing state law already includes the \u201creturn to post office\u201d standard, which is at odds with the controller\u2019s view. <\/p>\n
The ICI sued the controller\u2019s office in 2021 in Sacramento Superior Court court over the issue. A settlement followed, and a judge in 2024 ordered the state and ICI to come to an agreement, which has yet to happen.<\/p>\n
Pettrie Collins, in an interview this week, called the returned mail provision in her now- defunct bill \u201cthe most protective for Californians and the most protective for Californians\u2019 assets and investment accounts.\u201d<\/p>\n
Cohen\u2019s office, in a statement, said \u201cCalifornia should not pretend an owner has been found merely because the mail was not returned.\u201d <\/p>\n
The office also expressed concern that fees by a securities holder would diminish a forgotten account.<\/p>\n