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Replies to post #208331 on Fortress Financial Group fka FFGO
12/21/12 5:38 PM
* Draft Final Rule: Lost Securityholders and Unresponsive Payees
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A similar rule already applied to recordkeeping transfer agents, who are the
intermediaries between the clearing house and the broker-dealer. The
Dodd-Frank Wall Street Reform and Consumer Protection Act tasked the SEC
with extending the application of this rule to broker dealers so that
broker-dealers have the same obligation.
The new rules also require broker-dealers and other securities market
participants to provide notifications to persons who have not processed
checks that they have received in connection with their securities holdings.
“For the first time, broker-dealers will have a duty to reach out and find
those they have lost touch with. It’s a straightforward rule with a
common-sense objective,” said SEC Chairman Elisse Walter. “Among other
things, it will make it more likely that investors will get the money that
they may not have realized is owed to them.”
Specifically, the new rules:
* Require broker-dealers to conduct certain searches for lost holders
of securities that transfer agents currently are required to conduct.
* Require “paying agents” – including certain issuers, broker-dealers,
transfer agents, and other entities – to notify certain persons – termed
“missing securityholders” in the statute and “unresponsive payees” in the
adopted rules – in writing that the paying agent has sent the person a check
that has not yet been negotiated.
* Excludes paying agents from their notification requirement when the
value of the not yet negotiated check is less than $25.
* Add a provision clarifying that the notification requirement for
paying agents shall have no effect on a state’s ability to collect funds
that it deems abandoned under so-called state escheatment laws.
* Add a conforming technical rule to help ensure that broker-dealers
have notice of their new obligations regarding lost holders of securities
and unresponsive payees.
The original rule – Rule 17Ad-17 – required only recordkeeping transfer
agents to exercise reasonable care to ascertain the correct addresses of
“lost securityholders” and conduct certain database searches for them. This
loss of contact can be harmful to holders of securities because they no
longer receive corporate communications or the interest and dividend
payments to which they may be entitled. In addition, the securities and any
related interest and dividend payments to which the holders of securities
may be entitled are often placed at risk of being deemed abandoned under
operation of state escheatment laws.
The amendments will become effective 60 days after the date of publication
of the release in the Federal Register. The compliance date will be one
year after the date of publication of the release in the Federal Register.
* * *
The new rules are available in draft form while pending review at the Office
of Management and Budget (OMB) of the major rule analysis under the Small
Business Regulatory Enforcement Fairness Act. After the OMB review is
complete, the Commission will issue the rule release in final form and send
it to the Federal Register for publication.
AI
