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Scott Regan: Thank you for joining us today for Keane's webinar, Preparing for the 2016 Escheat Season. I'm Scott Regan, executive vice president at Keane. I'd like to introduce and welcome my colleague Maureen Ferrari who as Jill pointed out is managing director of our unclaimed property compliance and reporting group. Maureen is a former director of holder reporting at the Commonwealth of Pennsylvania, and has led our practice for over five years here at Keane. Good afternoon, Maureen.

Maureen Ferrari: Good afternoon, thank you, everyone.

Scott Regan: Thanks for joining us. For those of you who don't know Keane, Keane is a firm that focuses one hundred percent of our efforts on unclaimed property compliance matters for our clients exclusively. We're about 175-person company, and all of our efforts are around helping our clients comply with state unclaimed property laws. By way of agenda, we'll do an overview of unclaimed property reporting, talk about some holder responsibilities; we'll talk about establishing a timeline, go over some common reporting errors, identify best practices, and then allocate time for questions and answers.

We'll start with an unclaimed property overview. All states, and a few non-states and territories here in the United States have unclaimed property laws. Purposes of unclaimed property laws are for protection of owners of property from unjust enrichment by companies. Every company in the United States has an obligation to report unclaimed property, and all states and quite a few other jurisdictions have laws in this regard.

The roots of these laws were established in English common law. In the English common law, there was a custodial, the law was centered on the lord taking property, but here in the United States, of course, it's more of a custodial law. The states stand in the shoes of the rightful owners, and have no more or less rights to that property than the rightful owner. The laws are all governed at the state level, and as indicated, there are fifty-five reporting jurisdictions, including the District of Columbia, Puerto Rico, Guam, and the United States Virgin Islands. One of the confusing things that we'll get into is that no two laws are exactly the same.

This slide talks about some property types. I think some are common ones that most of you have probably considered, like trade AP or accounts payable, credits and payroll, but there are many, many less

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common property types that you probably haven't thought about, including deposits, refunds, benefit payments, third-party self-insured health and welfare plans, rebates, stocks, dividends, bank accounts. There's a whole host of property types that need to be considered.

The rules of unclaimed property were established by a case called Texas v. New Jersey in 1965, and it established what we call three priority rules. Really, the first priority rule is to report to the state of the last known address on your books and records that's a malleable address. The second priority rule calls for reporting to the state of incorporation, if you have unknown address or, really and the third is, if you have no address or a foreign address. Some reasons why you may have no address include systems conversions, acquisitions of various companies, etc.

Why should you care? It's the law and all companies should be in compliance with the laws. There's no statute of limitation for unclaimed property, so unlike a tax filing, there's no, you can't introduce your report with a zero report and expect there to be a statute of limitations on that. The states have the ability to go back as long as they like to audit your books and records. This is an area that typically has been overlooked by many companies.

In fact, the state’s estimate that somewhere between seventy and ninety percent of companies are out of compliance for general ledger property types. We'll talk about this, but there's a tremendous amount of audit and enforcement activity. With those come significant penalties. There's actually been quite a bit of reputational risk for quite a number of clients with bad PR and bad press in some of the states. We do see that these become material problems for companies.

I'm going to turn it over to Maureen to talk a bit about your responsibilities as holders.

Maureen Ferrari: Thank you, Scott. Let me just verify that the states refer to you, the entity that's reporting unclaimed property, as the holder. You'll hear us refer to holders throughout this presentation. That's really the label, so to speak, that the state is applying to those who report unclaimed property. Throughout the presentation, I'll try to put my state hat back on for you, and give you a little bit of the state's perspective as well, since as Scott mentioned, I used to work for Pennsylvania's unclaimed property program.

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What are your responsibilities as a holder of unclaimed property? The first one is to file a timely report. As you know, there are various reporting deadlines for the states. Most of them are either October 31st or November 1st, but we have some now in the spring for several jurisdictions. Some are even going into the summer, like Michigan and Texas, with a July 1 deadline.

It's very important to file your report by the reporting deadline, because if you don't, a state like Florida or California will levy a penalty against you for every day that the report is late. It's very important to file on time. You also have a duty to perform due diligence within a certain time frame, and all states except Pennsylvania require that you send a due diligence or notice letter to the owner of the property, informing them that the money is going to be turned over to the state unless they take action within the next thirty to forty-five days.

The states that do have due diligence requirements usually want you to do that between a 60 and 120-day time frame. The reason for that is because they don't want you to send out a letter two weeks prior to reporting and then send the report to the state, so that when it goes to the state, there's kind of a lag between when the report arrives and when it's live on the database for the person to make the claim. You really want to send it out 60 to 120 days prior to the reporting deadline for most states.

You also have a duty to file in the state-mandated format. While most states, you know, they all have different laws, they do agree that the NAUPA-2 format is acceptable. NAUPA stands for the National Association of Unclaimed Property Administrators, and that's kind of the state trade association.

You have a duty to maintain copies of the reports and the supporting documentation, and that's really going to come into play and help you if you receive an audit notice from the state. You want to keep in mind that the state audit look-back period can go back as far as twenty years or so, particularly in Delaware. You really want to maintain copies of the report, but also the supporting documentation, if you can just electronically file that somewhere. We recommend at least ten years, but indefinitely if you have the ability to do so. You have a duty to protect the funds until they're reported and transferred to the state.

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As part of your holder responsibility, you have to ensure that you're filing a complete and accurate report. You really want to avoid under- or over-reporting, and let me explain what I mean by that. By under-reporting, it means you're not reporting all of the property that is due to be reported to the state at a given time. This can happen a couple of ways. One, if you're making incorrect dormancy decisions or applying an incorrect dormancy period, or if you're not looking at all of the property types that may be considered reportable from your organization.

Let me give you an example. Banks sometimes, when we on-board banking clients at Keane, we look at their reporting histories and sometimes we see that the only property types that are being reported are deposit accounts. The state is going to look at you for all of your lines of business, not just deposit accounts. They're going to see if you have a mortgage business or a loan business. They would expect to see property coming from those lines of business.

Also they see you as a company, a company doing business just like any other company, so payroll and commissions, AP and AR, vendor checks, things like that, they would expect to see coming from the banks as well. Look at your lines of business, but then also look at your own general ledger to make sure that you're not under-reporting any of those property types.

Failing to report entirely is going to be a huge red flag to the states. Basically, the states are looking at your entire reporting history, and if they see that you've reported for three years, but then haven't filed a report for five years, they may question you. If you have nothing to report those years, and the state doesn't require a negative report, then you're fine. But if you fail to report those years, it could be a big red flag to the state. They're looking at your reporting history over time to assess whether you're an audit candidate or not.

Like I mentioned, you have a duty to report every applicable property type that's generated by the organization. You have an obligation, unless otherwise identified by contract, you're the legal, you have the legal obligation to report as the holder of the property. If you have a transfer agent reporting your securities, or a payroll administrative company reporting your payroll, number one, you should make sure they're fulfilling that obligation and ask them for copies of the reports each year, because the state, like I said, is going to look at your entity as a whole.

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If you're a public corporation, they're going to make sure that you're reporting your securities and reporting the general ledger property. If that obligation is contracted to a third party, you want to make sure that the third party is fulfilling that obligation, because ultimately the state is going to hold you the holder accountable. This last bullet point, what we're really saying here is, if you don't pay the owner, you have to pay the state. If you have an employee who fails to cash a wage check, it doesn't forfeit their right to the money. The money then goes to the state.

You want to take a look at when you're preparing your unclaimed property reporting, where do you start? Where we start here at Keane is by establishing a timeline, because like I mentioned, there are time frames to do things within all of the state statutes. You really want to look at the deadline to file the report, and then kind of back into that with when you're sending out your due diligence notices, when you're gathering the applicable property for the report.

This is kind of a timeline that we use that I think works well for both reporting cycles, the spring and the fall. Right now, we're working on the spring reporting cycle, and in November and December, we're asking our clients to give us records, so you should be gathering your records, anything maybe that's a year outstanding and greater. And determining what is reportable, whether you're running that through a database, whether you're using a reporting software application, you want to determine your reportable population for spring 2016.

Once you've determined the population, so January and February, you're going to be sending out your due diligence mailings. You want to make sure that anything that qualifies for due diligence, according to the state threshold, receives a letter, and if the state requires that a certified letter be mailed, like for example, New York and New Jersey for a fall state, that you're meeting that requirement.

Then, after the due diligence process, you're really going to go ahead and file your final reports. That happens March through June for the spring state, and June being the remit report for California. You would have filed a notice report in the fall and a remit report in the spring for California, and that's the one state that has a dual reporting process. You know, feel free to use this timeline. We think it works really well for meeting the deadlines as well as the due diligence mailing requirements.

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This is a bit of a cheat sheet we added in here for you. You want to know the states and know the dates. Having said that, spring deadlines to file reports go from March into June. However, if you've done your due diligence and the cut-off date for spring states is December 31st, kind of like taxes, so if you've completed your due diligence in January and February, and you're ready to file every state in March, you can go ahead and do that. You don't have to wait and hold your report until the actual reporting deadline.

In fact, I would encourage you to send it when you have it ready, because as it becomes closer to the state deadlines, the states are getting flooded with reports and FedExes are coming in the door fast and furious. If you get yours there a little early, the state is not so busy and they have time to reconcile it and get it live on their database, so that your customers can then go file a claim with the state.

When you file a report with the state, you'll notice, probably, if you've ever contacted the state, that there's some time in between when the report is filed and when it's actually live on the state system so someone can make a claim. That varies greatly by state, really depending on the resources that they have. It could be anywhere from a few weeks to a few months or greater to get that report live. The sooner you can file it, the better, and then your customers can go directly to the state for payment.

This next slide is just a demonstration of the spring state reporting deadlines, and one thing I wanted to point out about all of the states is that some states have a different schedule for life insurance companies and banks, financial institutions. They file on a different schedule. Some of the life insurance deadlines are in May, banking could be in the fall as opposed to the spring. If you are a life insurance company and you're filing everything on the same date, you're probably not doing it in accordance with the state law. You want to take a look at, what is the filling deadline for your particular industry to make sure you're in compliance with the state schedule.

Today is January 14th, 2016, the heart of the winter here, but we here at Keane are working on the spring cycle. Here's what you should have done at this point in the cycle. You really should have determined your reportable population. That would be, all of your outstanding checks applied to dormancy period and determined what is going to be

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reportable for spring. You should have quantified your liabilities for the spring cycle, what is owed to each state at this point, what is eligible to be reported to each state.

For Connecticut, Delaware, and New York, they are the three states that have March reporting deadlines, you should have mailed your due diligence letters by now. Connecticut is very particular about the timing of the due diligence letters. They actually want them done prior to December 31st of the year prior. You want to pay particular attention to those three states, and you really should have your due diligence mailing out.

For the rest of the states, you should be getting your due diligence letters ready or even out the door within the next few weeks, so that your customers have an opportunity to respond. Now if you're looking at this slide, and you're like, wow, we're really behind the eight-ball and we're not going to be able to make some of the filing deadlines, you want to consider filing an extension with the state. Just as you would file an extension for your taxes, there are, the majority of states will grant an extension for good cause.

If you're having system issues, or the person who handles your unclaimed property won last night's Powerball and they gave their resignation today, you probably want to file an extension with the state to gain extra time. Some of the states will give you thirty, sixty, or ninety days to extend the reporting deadline. There are a couple of things to note about that. There are a few states that will ask for payment up front, so even if you haven't done your due diligence or anything like that, or are not ready to file a report by the reporting deadline, they want an estimated payment. That can be a little bit difficult if you're dealing with securities, but that's what the states will require.

Also, a lot of states, you know, they're going to really have you document the reason for that. Some states have a particular form on their website that you can fill out to apply for an extension. Other states will only grant one extension for one year, so if you go back to the well next year and need an extension again, they're not going to grant it for you. I would just be very judicious in them, applying for extensions.

Let's talk a little bit about when you're filing your report, and how important the owner information that you're putting on that report is.

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I'm going to kind of put my state hat back on for you, and let you know that, the more information that you can give a state, the better it is for them to make accurate payments to the owners. Also, once you've filed a report, you really don't want to hear from the state. If you don't give them enough information to make a claim or for the customer to, you know, verify the claimant's identity, then the state is going to come back to you and ask you to go back through your records and provide additional information. My advice to you is just be, give it all up front as much as you can, that way you don't have to hear from the state.

You want to do the complete name and last known address, if you have it. Social Security number, extremely important. From a state perspective, to approve a claim for a John Smith is really difficult if you don't have complete address or Social Security number. California will actually reject some reports if, say, for wages, you don't report Social Security numbers, your report will be rejected, because the state is assuming that if it's an employee you have, or a former employee, you have a Social Security number, so they want that passed along.

Account numbers are really important, because when someone files a claim with the state, the state is going to first ask for them to produce the original document. Whether it's a check or a passbook from a passbook savings, a lot of times, claimants don't have that, but the state will ask for that original document. If they can match up the account number from the documents to what was reported, they can ensure they're paying the right person.

Of course, the amounts and the property type, description. Date of birth if known, you should be turning that over to the state, especially if you have some retirement property, that's very helpful. The last thing is joint ownership or custodial information, and this really applies to our banking friends out there, because when someone goes and files a claim with the state, the state is going to pay it out as you would. If you drop the joint owners from the account, and somebody goes in and one of the owners claims the full amount, and then the next owner comes forward, the state is going to push that back on you. Really important to just list all of the owners and the appropriate relationships between the owners.

We talked about the states having various laws, and how they're not all the same. They also have a lot of different requirements that can be really cumbersome if you're filing to all of the different states. But there

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are some things to keep in mind here that are very specific, because if you don't do it correctly, you risk your report being rejected by the state, and then you have to do it all over again. You want to look at, and the state websites are a good source for this information and they usually will update their holder reporting instructions every year.

You want to look at, does the state require you to file electronically? Meaning, by their website, or some other secure transfer of the file. Right now, Texas is the only, I consider it a spring state, that requires you to file the report via their website, and they'll give you a confirmation number and things like that. The other states are Oklahoma and Indiana and Wisconsin, they have a fall reporting deadline, but they also require you to upload your report to their website. We're seeing, slowly but surely, a lot of states going in this route. They don't want to receive paper anymore, they don't want to receive CDs or anything like that, they just want everything to go into their website, and it does make it easier to reconcile, and it should make it a little bit of a quicker process for the state to get it live onto their website for someone to make a claim.

You also want to look at, if the state requires a specific cover letter. Some of the reporting software will produce like a cover affidavit, and some of the states don't accept it, so they want their own cover letter. Now the unfortunate thing is, many of the state cover letters say exactly the same thing as the affidavit, but they want their logo on it and they want particular information in the order in which they're used to seeing it. You want to be mindful if the state is requiring their state-specific cover letter.

Then there are states that require the cover letter and/or the affidavit to be notarized. When you're preparing your report and you need to get them out the door pretty quickly, if you're coming up against the deadline, you may need to have a notary on site, or prepare to take them to a notary. The other really important piece of information is how the funds and the shares should be delivered. If you're reporting shares of stocks or securities, mutual funds, brokerage accounts to a state, most of the states have custodial accounts set up in which you have to transfer the funds. You want to look to the state's website for the information on where to transfer the shares.

And the funds as well. Some states require that you send them ACH or wire, California in particular does, if a report is over $20,000. There's all

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these little nuances that you need to be aware of, because in California's instance, if you don't file electronically or do an electronic payment over $20,000, you will get fined, and it could be pretty costly. We talked about the websites. Paper copies of the reports. Believe it or not, there's a couple states that still want you to, even if you file electronically, or send them a CD, they want the actual paper. In the spring, Vermont is the only state that requires that.

Then the report signer. You want to look at who is required to sign the report. Some states say the CEO or CFO. In reality, Keane signs a lot on behalf of our clients, as "agent for," and we've not had anything rejected. Just want to make sure you're aware of who is actually signing the report. The last thing is, does the state require a negative report if there's no reportable unclaimed property? Basically, it's just a compliance report indicating to the state that you have reviewed your records, and you have nothing to report for that particular year. I would advise you, you know, if the state requires it, just send it in, because that keeps your reporting history current, that you don't see lapses in the reporting history if you file that negative report.

We want to talk about, on the next slide, some common problems that organizations face, or common mistakes that are made when filing the reports. Kind of compiled this list with knowledge of myself, who used to be a state administrator, as well as others here at Keane, who used to work for the states, as well as through our experience here in on-boarding new clients and looking at their reporting histories, and seeing what challenges and mistakes they've made in the past.

The biggest thing that you could do incorrectly is use the wrong dormancy period. This will really, it could put you at risk of an audit, you could be under- or over-reporting to the state. Once you make the wrong dormancy decision, it's kind of all downhill from there. You really want to be mindful of the dormancy period. If this is something you're calculating by hand or manually, you want to make sure that you are updating your dormancy information every year, because states are trending downward with the dormancy periods going from about five to three years, and if you're unaware of that dormancy change, it's going to cause you problems.

The next thing is formatting names incorrectly. Like I mentioned before, you really want to send this property to the state and not have to hear

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from the state ever again for additional information. If you're putting last and first names in the same field, or it's running together, or you're putting it in a business field, it really causes the state problems in paying out the claims. Using the incorrect property codes could cause a couple of different problems. One, if I go to the state to claim my property and it was reported as a wage check from ABC Company, and I never worked there, but I did business with the company, I could just say, "This isn't mine, I never worked there," when in fact I may be entitled to it.

That's one thing, and the other thing is, states are looking at you as a holder in comparison with your competitors, or comparison with companies of similar size. They're looking at what property types you are reporting as compared to what property types your competitors are reporting. They would expect to see similarities, and if they don't they're going to question it. It could put you in a red flag situation with the state. Failing to submit complete owner information, again, like I mentioned, it's really all about giving the state enough information to pay the correct owner.

Placing data in incorrect fields, this is big, because if you put a Social Security number in an address field, you have to keep in mind that the state is going to publish that information in their website, and/or in the newspaper. Some states have newspaper advertising requirements. That's really important not to do that, you don't want to compromise somebody's Social Security number. There's a field to put it there, and don't put it anywhere other than that field.

Creating multiple payments for a single report. Maybe you have a report filed from your company, but you're going to, your payroll department is going to issue a check, and your AP department is going to issue a check. I would recommend you put it all on one payment because like I said, on due day, the state is receiving just hundreds of reports coming in the door every hour. You don't want to send payments separately so that the state can't reconcile it, and one payment goes missing or something like that. I would just recommend that everything goes, one payment for one report.

Sending reports without payment, of course, the state can't reconcile, and sending payments without reports is going to further delay the process of getting your report live on the state's database so that somebody can go make a claim. Aggregating property incorrectly, so

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aggregate reporting, some of the states allow it, although states are lately frowning upon aggregate reporting, but what you can do in some states, for property amounts under either $50 or $25, you can report it as a lump aggregated sum without owner information.

However, what we're seeing lately is that some of the states are then asking, they're saying, okay, you can report it that way, but give me an Excel spreadsheet of the owners' names and addresses. I would just advise, if you have that information already, just put it on the report, so that you don't have to hear from the state, or you don't have to produce a separate Excel spreadsheet that could get separated from the report.

Failing to identify joint owners. I mentioned how important that is in making sure that the appropriate payment is made to the appropriate parties. Then reporting only to the state of incorporation. I see this a lot with new clients coming on, where they say, yes, we're in compliance, we reported everything to our state of incorporation. What we'll talk about a little bit going forward, but it's just really not recommended. You want to report, you want to follow the priority rules that were established by the Supreme Court case that Scott mentioned, Texas v. New Jersey, and report to the state of the owner's last known address.

We want to get into some best practices, because we know we all want to do this the most appropriate way, so as we don't hear from the state, that we have a good, clean reporting history, and we don't end up on a state's radar for an audit. I just talked a little bit about reciprocal reporting. When you report everything to the state of incorporation, I hear a company say, well, we do that because my state of incorporation will then pass that property along to the appropriate state of the owner's last known address.

I'm here to tell you, as a former state administrator, that that doesn't always happen. For one thing, there are no written agreements between the states that require reciprocal reporting. There's no handshake agreements, there's no written agreements. It really depends on the state, the administrator, their willingness to exchange property, and the capacity or the bandwidth they have to prepare all those reports to the states and get them out on an annual basis. We see a lot of states just struggling to handle the owner claims that are being filed with their own states.

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Sometimes that reciprocal reporting gets pushed to the back burner for a year or two or three years. There's implications down the road. One, you could be using the wrong state's dormancy period when you do reciprocal reporting. I have never lived in New York, so I'm certainly not going to look in New York's database for my property. If you truly want to get it back to the owner, you should report it back to the owner's last known address.

Very timely on this subject, we saw a news article, I think last week, about New Jersey, where there was an internal audit done of the New Jersey Unclaimed Property Office, and one of the findings was that, they were holding onto other states' money. Very timely topic, and really just not a good practice.

Scott Regan: Maureen, I would agree with you. I think that most states would say that reciprocal reporting is really a thing of the past and ought to be avoided. A key point that you brought up earlier is this concept of the right dormancy period. So if you're reporting to the state of New York and you're expecting reciprocal reporting to California, it's likely that you're using the dormancy periods for New York, which most likely are not the right dormancy periods for California. We've seen problems come up in audits all the time with regards to that. It's definitely not a good practice anymore. Most states would, I'm sure tell you, we've seen this, it's not the best practice, and there's no reason not to be reporting to the state of the last known address.

Maureen Ferrari: Exactly, yep, thank you, Scott. The next bullet point is, be aware of the statutory time frames to complete due diligence. I talked about that at length previously. Like I said, Connecticut wants you to do your due diligence by the end of the calendar year, and they will call you out on that if you don't, and they find out that you're off on the timing. States are now starting in their cover letters to ask for the date that you did your due diligence, and they're going to compare that to the time frames as well. While doing due diligence is certainly better than not doing it at all, you certainly want to keep in mind the time frames for the state, because the states are starting to enforce that a bit more.

Review the state websites and learn the most up-to-date reporting information. Like I mentioned, the states will update their websites, usually annually, with instructions and things like that. Also a lot of states have specific holder numbers that you can call if you need information. I

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would caution you on one thing, and that is, sometimes, and we have found this in our compliance department here at Keane. When we, of course, we review the state websites for new information almost on a daily basis, we're out there looking at the state sites.

What we've learned over the years is that sometimes what the guidance that is provided on the website or the guidance that's given to you over the phone by somebody at the state doesn't always jibe, so to speak, with the state statute. It could be conflicting, and you want to make sure that if you're speaking to someone at the state and getting their guidance on something, I would particularly ask them for the statutory reference for what they're telling you. We always err on the side of the statute, because it's defendable, but the guidance can often be different, so I want you to be mindful of that when you're looking at the websites and talking with the state administrators.

Scott Regan: Other best practices include having multiple employees be knowledgeable about the unclaimed property process. What we've seen at a lot of our clients when they come to us is that there may be one person, I think Maureen pointed this out, who has been solely responsible for unclaimed property and who leaves, and the unclaimed property program halts for a few years. We also think this is a pretty good protection against internal fraud. There's certainly been some public information, both at the states and in corporations, where people who have control of these types of assets can create fraudulent situations.

Examine your M&A activity. I'd say that this is an area that we see a lot of problems in. Many of our clients, especially when it comes up in audits, have acquired companies. The companies that they've acquired often you'll perhaps will transfer an AR credit balance over without detail. The history of compliance could be spotty at that company. Folks in the M&A departments are not typically considering this when they're doing their due diligence for an acquisition, and so it could very well be that you have some issues with some of the companies that you've acquired over the years. We would like to recommend that companies look at unclaimed property and more and more companies are looking at unclaimed property during the acquisition process. Certainly post-acquisition, it's something that comes up constantly.

We certainly recommend that you stay current, be aware of all the legislative changes that are happening in your industry. We of course at

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Keane keep track of all the legislation and make our clients aware of that minute to minute in real time, throughout the days and months, and make sure that you're updating your own systems. I think that there certainly are opportunities, and this sort of goes to the last slide here, to participate in industry organizations that represent your interests. What I'm driving there is, you may want to be putting your company and yourself in a position to advocate for laws or to advocate against changes in laws that don't represent the best interests of your particular industry.

There's quite a bit of that type of consideration in financial services industries and in insurance industries. There has been a lot of different changes in applications of dormancy, of returned mail, different changes with the rules of activity, so I'd say that's certainly an area where a lot of consideration in that type of activity is given. Finally, certainly it's important, very important to maintain copies of all of your filings, I'd say indefinitely. At least ten years as a good rule of thumb, but I think indefinitely is the way to go. In many, many audit situations, we're hired to defend our companies in audit situations; it's a real problem, because they can't produce past filings and the data in support of those filings.

I'd also recommend that you keep tabs on all the filings being done by third parties, and we mentioned some of those earlier, like transfer agents, third-party self-insured health and welfare plan providers, rebate fulfillment companies, payroll companies, all those types of companies may have some unclaimed property that they're reporting on your behalf. Next slide, I think I'll turn it back over to Maureen to talk a little bit about legislation.

Maureen Ferrari: Sure. We are constantly tracking legislation here at Keane and passing that information along to make sure that everybody's aware of things that can impact their industry. These are some recent legislative changes, and you'll see, the states that have an asterisk by them, they have fall reporting deadlines, but we just wanted to make sure that you were aware of these, because you know, you really have to start preparing now for fall, if you need to make changes on dormancy and things like that.

Arkansas reduced the dormancy period. Actually, in '15, they're going to start enforcing it for fall of this year, and for many property types, not all, but many, and it went from five to three years. There's also some new reporting requirements for the oil and gas industry, and that was signed

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by the governor on 4-4-15, April of 2015, and the new law reduces dormancy periods from three to five years, I'm sorry, that's on the dormancy periods.

On the mineral interests, the states are starting, and we're seeing kind of a trend in the oil and gas industry in this area, where the states want more information about the well, about the owner, about the location. Arkansas is looking for the county, section, township and range of the well, or the county, section, township and range from which the abandoned minerals were severed, which is all well and good, except there's nowhere to put that on the state reporting forms.

We had to point that out to the state, and we're in communication with them just to get some guidance on exactly where we should put that information. We'll pass that along as soon as we receive it. We're seeing that as well in Texas, where they are also asking for the lease or property or well name, and any lease, property, or well identification number, and also the county in which the lease property or well is located. Again, Texas has no fields on their reporting forms or in the NAUPA format to provide this information, so we asked the questions and we await guidance on that.

Also, you'll see Pennsylvania is on here. Pennsylvania reduced their dormancy from five to three years. That was effective actually last year. Delaware, you know, very active audit state and a lot of changes happening in Delaware these days, but on the holder side, for holder reporting, they want you to designate a primary contact for the state to be in touch with, who's handling your holder reporting, and they're also going to start to send out reminders about 120 days prior to the reporting deadline to remind you that you need to file the report.

Scott Regan: Yeah, there's just so much legislative activity and litigation going on in our industry at the moment. I'd say the most typical change that you see is the reduction in dormancy period, and the states of course while they are standing in the shoes of the rightful owners, the law suggests that the benefit of everyone in that state as well, so states are looking at this really with a critical eye to close budget shortfalls. That's probably the most dynamic change, although they are extremely miniature, minute changes that are coming along as well.

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Just a quick bit about how Keane can help before we move into some questions and answers, and we do have quite a few queued up. Thanks for your presentation there, Maureen.

Maureen Ferrari: Sure.

Scott Regan: As I said in the beginning, Keane is a firm that provides escheat compliance solutions exclusively to our clients. They're really broken down into a few areas, consulting, compliance, and communications. Maureen, of course, represents the compliance group, that's our outsourced annual reporting group. I'd say that we're one of the larger preparers of abandoned property reports in the country. We file on behalf of something around five thousand legal entities a year. We take all of their data and determine what needs to be escheated, where it needs to be escheated. Perform all the mandated due diligence, sign reports as agent and pay the jurisdictions. That's compliance.

On consulting, we're one of the top white shoe unclaimed property consultancies that helps our clients when they're contacted by states and third-party auditors for contingent audits. That helps our clients who want to evaluate their compliance identify risk and gaps and close those gaps, remediate those problems and either make first-time voluntary filings, or catch-up filings with jurisdictions. Roughly, a general rule, we'd call a voluntary disclosure agreement.

Of course, there's some clients that need policy and procedures reviews, better processes internally, want us to kind of keep track of legislation for them. Then really finally, on the location, which I would call communications, think of this as advanced due diligence. It's location services beyond what's mandated by states, to keep in contact with customers. I'd say that the hottest application for that type of service is in a financial institution that wants to prevent their clients, customers from escheating.

There's been a tremendous interest more on general ledger environment within the last year or so in applying some remediation services to more general ledger property types. I think in service of escheat reduction, penalty reduction, and also just keeping your customers on the corporate side in good order. Then finally of course, just as our clients escheat, so do other firms escheat money that could be owing to them, and we assist

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our clients identifying money that's been escheated to other jurisdictions but that they can recover.

I think that's the bulk of our presentation. We do have some questions linked up. Joe, you want to hand them to me? Yeah, sure, appreciate it. So question number one. Does each state have a guideline on its dormancy periods?

Maureen Ferrari: Well, each state's dormancy period will be in their statute, and you can find that information on the state's website, and there should also be a link to the statute on the website. I would go to directly to the statute, and you will see that. Be mindful that every, a state could have multiple dormancy periods depending on the property type, so don't take three years and apply it across all property types. You need to take a look at what is the applicable property type and dormancy period for that property type.

Scott Regan: Thanks, Maureen. One question we have is, can you give us an example of over-reporting? From my perspective over-reporting could look like a lot of things, but let's say you're a bank, and the state allows you to prevent escheatment in a bank account for a customer that has linked accounts. Some banks don't take the opportunity to look and see if the savings deposit account has a linked credit card account or a linked demand deposit account. There could be exemptions that states will allow that companies don't consider.

Frankly, there are accounting errors that companies make all the time. They've voided checks and they've reissued, they didn't tie the voids to the reissue, and it still appears that they have an outstanding obligation. Part of the service we provide is to advise our clients on all potential areas of over-reporting. Anything else you'd like to add to that, Maureen? Is that ...

Maureen Ferrari: There's a little bit of risk of over-reporting in the securities arena, if you're reporting, you know, there's specific rules in the states that apply to dividend reinvest accounts that may be make it exempt from reporting. Securities reporting is really very difficult. There's a lot of different factors that come into play. There's opportunities to apply multiple dates to trigger the dormancies, so if you're not applying those correctly, or your service provider is not providing, doing that correctly, you could be over-reporting for accounts that may be exempt, that may

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be ERISA-protected, such as pension plans maybe come under federal protection and be exempted from reporting. Like Scott said, there's a lot of opportunities for over-reporting, and that's just a few examples.

Scott Regan: Thanks, Maureen. We have a question here with regards to outstanding checks to owners outside of the United States. Are due diligence letters required?

Maureen Ferrari: They are required; yes, and then ultimately, then, they are reportable to the state of incorporation.

Scott Regan: We have a question about customer and retail loyalty program cards. The customer typically provides no compensation in exchange for loyalty dollars, specifically in PA and New Jersey. My opinion there would be, it depends, but I'd say that one of the bedrocks of unclaimed property is the concept of offering consideration, meaning that consideration has to be provided for the payment that was provided. I think that would be one of the areas that our consulting team would probably look at and help you determine whether there is a true obligation there to escheat or not. That's a good question. What else do you have here, Joe, let's see here.

Okay, if you never have filed an unclaimed property report in a state where there is negative reporting, you do not need to file a negative report. However, if you filed a report, then you must submit a negative report. Correct, yes. So the question is, if you've never filed a report, do you have to introduce a negative report in a state that has a negative requirement? I think Maureen and I would agree, no.

However, if you introduce a report in a state that does have a negative report requirement and it's a positive report, do you need to continue to report on a negative basis to that state? My answer would be yes, unless we prepare some sort of affidavit to that state, saying that was a once and final filing, and never, ever have any reportable property of that type in that state again. I think, Maureen, would you agree that the answer would be yes, if you introduce a positive report in a state, then you have to continue reporting on a negative basis, if there's a negative requirement, right?

Maureen Ferrari: That's our practice, how we do it here.

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Scott Regan: Okay, let's see here. Should I just read a question on top here? Retain mail for a shareholder from the post office with notification of new address. Should we be changing the address based on the notification and re-mail or send confirmation to shareholder before changing our records? Okay, I think the question is basically saying, coming from a transfer agent, if they have returned mail from a shareholder, and they get a new notification of an address, should they be changing the address or should they be getting a notification?

The way I would answer that question is, it depends on your corporate policies. If you're a company that's maintaining financial, if you're maintaining financial assets for a company, and you find out or you believe that there's a new address, what's sufficient to update your systems? I'd argue that probably the best practice would be to get a confirmation from that owner that they have a new address before you make that the address of record and begin to send the kind of confidential financial statements with Social Security numbers to an address that you think might be a new address.

For instance, let's say you got a notification from NCOI, for instance. Would you agree with that, Maureen? Probably best practice would be to, anytime, even if you're doing a rule 17Ad17 search, if you do your own, companies frequently will do their own address searches through a vendor, I think it's always best to get a confirmation from that owner.

Maureen Ferrari: I agree with you, Scott. The next question is an interesting one, and I'll be very blunt in my response. The question is, what if you have never escheated funds? Should you compute your penalty and interest prior to escheating late items? My answer to that would be, heck, no. Here's the deal on penalty and interest. All states have the statutory authority to impose penalties and/or interest on a report.

At this current time, there is probably five or six states that are actively charging penalties and/or interests. Other states are not. The one state that is doing that is California, but they will send you a penalty and interest assessment. Don't calculate it on your own. Let them calculate it. The caveat to that is, they're about two years behind, three years behind, in sending out those assessments.

If you filed a report with late property in November 2015, don't think you're off the hook. You'll probably hear from them in 2017 or 2018 with

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your interest assessment. But there are states that are not charging it and are pretty holder-friendly and will just accept the report with the full amount due without charging penalties or interest. Don't calculate it on your own.

Scott Regan: Yeah, and the flipside of that would be, consider calling Keane to help. We always work with our clients to help them get out of penalties when they're filing for the first time. You know, we assess their liability, we remediate, and we make some decisions with them about how to come forward voluntarily to the jurisdiction. Certainly, through our government relations group, which has a number of former state administrators on the staff, we frequently are able to negotiate away any penalty and interest.

Maureen Ferrari: Here's a good question. If a holder has reported all escheated property to Delaware because they had system issues, missing owner address, should they send a corrected report as the addresses become available? I think that system issues are not uncommon and sometimes the address information becomes available at a later date. You know, you can file what's called an amended report, and you can add the address information back on, and that only helps your customers be able to be reunited with their property.

If the address information comes up, you can file an amended report with the state. Now, what's going to happen is, that the address information may show that all of that property is not due to Delaware, but I would file the amended report with the address information on there, so that people can be reunited with their funds. Without that address information, they're never going to have even the opportunity to get that money back.

Scott Regan: Next, are there states that prevent fees from being withheld from escheated amounts?

Maureen Ferrari: Yes, so a couple of things on that. For financial institutions, there are fees that you're able to charge on dormant accounts, that they have to be fair, they have to be within the contract, they have to be disclosed to the owner, they can't be usurious. A lot of stipulations. Then there are some states that allow you to deduct charges for things like due diligence or certified due diligence. Some states have, Delaware, New York and Puerto Rico, have an advertising requirement for insurance companies,

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banks, and utilities, and I think New York allows you to deduct some of your expenses.

There are opportunities to deduct some expenses that the states allow for just the act of reporting unclaimed property. Then when you're charging a fee on an account, it really, the rule of thumb is, it has to be disclosed in the contract, you have to apply it across the board, you can't apply it to some members and not others.

Scott Regan: Thanks. How should a firm handle international unclaimed property?

Maureen Ferrari: International unclaimed property, as we mentioned, you are obligated to send due diligence letters. If it's in Canada, the province of Alberta has an active unclaimed property law, so if you have operations in Alberta, you may have some obligations to report it to Alberta. Otherwise, it goes to the state of incorporation.

Scott Regan: Yeah, that's great, Maureen. If you are a U.S. entity, and you have an obligation in a foreign country, it's different than if you are in a U.S. company with operations in Canada. So if you're in Canada, if you're in Alberta, and you have a company in Alberta and an owner in Alberta, then Canadian law takes. If you're in the United States, and you have an obligation to a person in England, then it's your state of incorporation that takes priority.

Let's see here, what's next here, Joe, from the top? Okay. I don't have the history of which states have been filed in the past my company, so how can I find out which states I may need to file negative reports? That's probably a good question to sidebar on. For the person who asked the question, you can give us a call, and we'll help answer it directly. I think the answer is that we certainly have a list that we can provide of which states provide or require negative reporting.

Can you show us an example of a completed NAUPA-2 report? I can't show you one on the screen at the moment, because I don't have it at my fingertips, but again, for sure, if you contact us...

Maureen Ferrari: Yeah, I think if you go on the NAUPA website, there might be something on there. I don't know if I can give you one, because a completed would have our client information on it, so we don't want to pass. Check out the NAUPA website, www.naupa.org. There's probably a sample on there. If

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you don't find it on there, you can contact me directly and I'll see what I can do for you.

Scott Regan: For the remaining questions, we will answer those questions in writing, and circulate them to the folks who asked them, with a copy of the presentation to all attendees. Maureen, thank you so much for joining me today in this presentation.

Maureen Ferrari: Thank you.

Scott Regan: Certainly appreciate everyone's participation and attendance. This last slide shows Maureen's and my contact information. Please feel free to call us with any questions.

Maureen Ferrari: Thank you.

Scott Regan: I appreciate everyone's time. Thank you.

Notice:

The content contained within this document does not constitute legal, financial, accounting or any other type of advice. It is provided solely for educational and informational purposes. Individuals are urged to consult with counsel and other advisors about their particular facts and circumstances.