States Should Not Mistake Long-Term Investing for Abandonment, Says ICI

Washington D.C. – States enacting "inactivity standards" for unclaimed property laws risk wrongly seizing and liquidating securities from long-term investors, according to the Investment Company Institute (ICI). The trade association argues that ordinary buy-and-hold strategies, where investors may not log in frequently but maintain contact and intent, are being misinterpreted as abandonment.

The ICI highlights that these standards can lead to the forced liquidation of securities. When an account escheats to a state due to a set period of inactivity, the investor may only receive the value of the securities at the time of sale, potentially losing significant dividends and capital appreciation over time. This contrasts with investors who keep their contact information updated and actively manage their investments for the long haul.

Florida recently updated its unclaimed property law to better reflect modern investor behavior. The new standard incorporates both a returned communication requirement and a 10-year period to indicate interest, allowing actions like website access or app engagement to count as activity. California is considering similar protections through Assembly Bill 2031, which aims to prevent the inappropriate escheatment of securities for roughly 7.8 million households owning mutual funds or ETFs in the state.

The Investment Company Institute is advocating for states to adopt clearer definitions that distinguish true abandonment from typical long-term investment behavior. By following Florida's lead and passing legislation like California's AB 2031, states can ensure that investors' savings remain protected and accessible, rather than being prematurely liquidated due to outdated inactivity rules.