Best Practices for Securities Receipt and Maintenance

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Juniper Brown
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1 Best Practices for Securities Receipt and Maintenance Michelle Colbert, Senior Vice President, Xerox State & Local Solutions John DeMarco, Managing Director, Kelmar Associates, LLC Vilka Markovich, Assistant Vice President, Xerox State & Local Solutions The Foremost Authority on Unclaimed Property

Managing Director, Kelmar Associates, LLC Vilka Markovich, Assistant Vice

2 Agenda Introduction Security Types and Delivery Reporting Instructions Security and Report Receipt Security Maintenance Reconcilement Project Questions

3 Security Types Stocks Common Preferred Warrants Exchange Funds Fixed Income Bonds Treasury Money Market Foreign Securities Mutual Funds Open-end Closed-end Privately Held Worthless Securities

4 Security Types Held

5 Historical Receipts

6 Delivering Entities Transfer agent Broker dealers Reporting agent Private companies Fund companies

7 Receipt Methods Electronic DTC DWAC Foreign FED FundServe Statement DRS DRP Fund Companies Physical Certificate

8 Reporting Instructions Instructions for each security type Worthless securities DRP Mutual Funds Contact information Administrative choices Sample Instructions

9 DTC Encourage DTC deliveries whenever possible Emphasize importance of advance notification to custodian Alternative methods DWAC Direct Registration Shares (DRS) Physicals

10 Book Entry / DRS Require DRS delivery through DRS Profile if available Include instructions as to where statements and checks should be mailed in instructions Shares settled in account within hours Statements to be delivered to custodian Eliminate statements wherever possible

mailed in instructions Shares settled in account within 48-72 hours

11 Federal Reserve (FED) Holder may keep if no instruction provided Contact custodian for information Dual Holdings DTC and FED Encourage Holders to deliver positions the way they are held

12 DRP (Dividend Reinvestment Plan) Administrative decision to manage DRPs Easiest to manage if DRP is closed Whole shares delivered via DTC (refer to DTC instructions) Fractional shares liquidated and cash sent via check Report updated by Holder cash applied for each individual owner s fractional amount; or fractions for all owners calculated, totaled, and sold Check to be delivered with report Eliminates statements Simplified reconcilement and claim payments

$updated by Holder cash applied for each individual owner s fractional amount; or fractions for all owners$

13 Mutual Funds: Open-End Funds Encourage Holders to use existing accounts Include contact information (state or custodian) Contact can provide account information Custodian can open account More efficient process for Holder and State Posting of shares delayed if opened by Holder Account combination/update is necessary Dividend Payment Choice Reinvest Cash

open account More efficient process for Holder and State Posting of shares delayed if

14 Foreign Securities Administrative decision to manage Not all securities can be received Delivering entity to contact custodian for foreign delivery instructions Typically, the following information is required: ISIN EuroClear # Number of shares CREST ID Country of origin Trade date Broker BIC Settle date

instructions Typically, the following information is required: ISIN

15 Physical Certificates Only if absolutely necessary Administrative decision to reject all physicals Reject physicals if eligible for DTC and DRS Register in state s or nominee name if one is available Provide specific delivery instructions as to where physical certificates should be mailed

and DRS Register in state s or nominee name if one is available Provide

16 Worthless Securities Any of the previous security types Administrative decision to accept/maintain Custodians can receive, maintain or liquidate for full accounting and reconcilement Options Research and liquidate if your Custodian manages this process Hold until DTC removes as worthless (PREM) Hold long term for possible regain in value

and reconcilement Options Research and liquidate if your Custodian manages this

17 Acceptance of Worthless Securities (Transferable/Non-Transferable) Pros Cons Full accounting of all receipts Holder delivers all positions Positions held in one place/account Research and sale option Holder not being asked to make decision on value Holder not being asked to report only securities with value Reconcilement problems Continuous holder follow up Tracking securities in multiple places Cost of maintenance Holder can report/remit if security becomes valuable

decision on value Holder not being asked to report only securities with value Reconcilement problems Continuous

18 General Best Practices Prepare detailed reporting instructions Delivery notification hours prior to delivery Forward all statements to custodian Eliminate physical certificates Close DRPs Prior to reporting deadline Obtain current Mutual Fund account numbers Obtain foreign delivery information from Custodian

Eliminate physical certificates Close DRPs Prior to reporting deadline Obtain

19 Securities and Report Receipt Balance reports as soon as possible Forward all statements to custodian Research exceptions as soon as identified Record security price upon receipt/settlement Utilize online data/positions for current data Record comments/status to save time

identified Record security price upon receipt/settlement Utilize

20 Securities and Report Receipt Separate custodians based upon reconcilement status Holding not yet reconciled Live fully reconciled Custodian based upon location DTC - Broker Mutual Funds - ANH (assets not held) Physicals Do not clear/reconcile reports until cash and shares are received

Custodian based upon location DTC - Broker Mutual Funds - ANH (assets

21 Securities Maintenance Daily review of transactions Update all corporate activities Update claim when transfer settles Apply liquidation proceeds Research and update exceptions immediately Always forward checks for related activity (dividends, cash-in-lieu) to custodian

22 Securities Maintenance Periodic review of reconciliation reports Statements Mutual Funds DRS DRP Income paid for underlying shares Certificates maintained by state, if held in-house

23 Transactions Transfers Check status of transfer eligibility Check DRS eligibility list Calculate entitlement, if not reconciled Update claim as paid when transfer settles Liquidations Set schedule for sales Calculate entitlement, if not reconciled, Apply sale proceeds immediately

24 Reconcilement Project

25 Reconcilement Project Create project plan with goals and target dates Develop starting point based upon resources Update and review plan at an agreed upon frequency Communicate progress Assign dedicated resources even if not full time Obtain data required in advance Report of all security holdings in portfolio Report of all securities holdings from system

26 Reconcilement Project Merge reports to compare Create exception reports for research Report types Balanced Positive report with no share position received Shares received with no corresponding report Unbalanced different share totals Research and reconcile approach Alphabetically Date Simple to complex

27 Summary Use your custodian Review and update reporting instructions annually Share contact information Develop process that works best for you Assign dedicated resources Update transactions daily Perform periodic reconcilements

28 Questions

Unclaimed Property Relating to Brokers and Dealers

Unclaimed Property Relating to Brokers and Dealers The following information corresponds to Article V-A of New York s Abandoned Property Law. For more information, refer to Article V-A of the statute.