IAA Comments on SEC’s Transfer Agent Rules Proposal, Recommends Alternative
November 4, 2026
Vanessa A. Countryman
Secretary
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
Re: Transfer Agent Rules; RIN 3235-AL55
Dear Ms. Countryman:
The Investment Adviser Association (IAA)[1] appreciates the opportunity to comment on the Securities and Exchange Commission’s (SEC’s or Commission’s) proposal to amend its transfer agent rules (Proposal).[2] Our comments are limited to the proposed amendments to Rule 17ad-17 regarding inactive securityholders.
The Proposal would amend Rule 17ad-17, which currently addresses lost securityholders and unresponsive payees, to help protect investors from premature or unwarranted escheatment of their investment account assets under state law. Specifically, the Proposal would add the concept of an “inactive securityholder” and require at least two written notices to securityholders whose accounts have had no activity for 18 months. The notices would alert these securityholders that their accounts are considered inactive and may be escheated to the state.
We share the Commission’s concern about recent trends in state escheatment laws that make it easier for states to escheat investment account assets, but we believe that a uniform preemptive federal standard, like the one outlined in the Safeguarding Americans’ Fairly Earned Retirement Act of 2026 (SAFER Act),[3] would better protect investors than the proposed notices. We therefore recommend that the Commission not adopt the proposed notification requirements and instead support congressional efforts to establish a uniform preemptive federal standard governing when investment account assets may be turned over to a state.
We share the Commission’s concerns about the introduction of inactivity standards and shortened dormancy periods in state escheatment laws
As the Commission recognizes, some states have shortened the dormancy period for securities from five to three years, introduced inactivity standards, or both. Under these inactivity standards, states may treat investment accounts as abandoned when an investor has not accessed an account or communicated with a financial institution for a specific period. The Commission also recognizes the particular risk to “buy and hold” investors, who may see no reason to access a long-term investment account regularly, especially when they receive periodic account statements.[4]
Inactivity should not be equated with abandonment, especially in investment accounts. Our members encourage their clients to invest for the long term, stay invested through market cycles, and avoid reacting to short-term market movements. Once invested assets are turned over to a state, the assets may be liquidated without the investor’s knowledge or consent, forcing the investor out of the market. Even if an investor later attempts to reclaim securities from a state, the investor may recover only the proceeds from the liquidation and not the securities themselves and will lose any market appreciation and other investment-related benefits, such as dividend payments. Laws intended to safeguard property for people who genuinely cannot be found should not put the assets of people who are not lost at risk simply because they are long-term investors.
Recognizing the severe consequences of these state inactivity standards, the Commission explains that the proposed notices “could aid the transfer agent, broker, or dealer in reestablishing activity in the account, prior to the transfer agent, broker, or dealer being required to remit funds or securities to the state escheatment authority pursuant to a potential dormancy standard, thereby advancing the protection of investors against escheatment of their assets.”[5] We strongly agree with the Commission’s investor protection objective and urge the Commission to continue to highlight the risk that state inactivity standards and short dormancy periods pose to buy-and-hold investors, but we do not believe that the proposed notification requirements would be effective in achieving this objective.
The proposed notification requirements could have negative unintended consequences
The Proposal would require transfer agents, brokers, and dealers to exercise reasonable care to notify securityholders for whom they have observed no account activity for 18 months. The notices would inform securityholders that their accounts have been inactive, that some jurisdictions consider inactive accounts to be unclaimed or abandoned property subject to escheatment, and that they may take specified steps to demonstrate account activity. The initial notice would be required no later than six months after a securityholder becomes inactive. The second notice would be required no later than six months thereafter, unless activity in the account has resumed. Current Rule 17ad-17 is a requirement to search for securityholders and does not include a notification requirement.
We have several concerns about the proposed notification requirements. First, the proposed notices could unnecessarily alarm and confuse investors, especially long-term investors, including those in states whose accounts are not subject to an inactivity standard and/or a short dormancy period. Second, although the proposed 18-month notification trigger would not itself establish an abandonment standard, it could be misunderstood as endorsing inactivity and a short dormancy period as evidence of abandonment. The notification requirements could thus inadvertently encourage states to adopt inactivity standards or further shorten their dormancy periods. Third, these notices would create significant and unnecessary costs and burdens for industry participants, and these costs may be passed on to investors. Most fundamentally, the proposed notices would not address the underlying concern with state standards that may treat long-term investors as having abandoned their accounts simply because they have not interacted with the accounts or financial institutions during the dormancy period.
We appreciate that the intent behind state unclaimed property laws is to protect property belonging to owners who cannot be located. However, we disagree with the National Association of State Treasurers and the National Association of Unclaimed Property Administrators that existing state laws adequately protect long-term investors from premature escheatment.[6] The letter also does not adequately address the concerns that investors’ securities are liquidated without their knowledge or consent, depriving them of potential future dividends and market appreciation. The letter’s assertion that many escheated accounts may have relatively small balances does not diminish the potential harm to the owners of those accounts.
A uniform preemptive federal standard would better protect investment account assets
Unclaimed property laws vary by state, creating a complicated patchwork of requirements, many of which may put investors’ assets at risk. We recognize that the Commission may not have the authority to establish a uniform federal standard that preempts state unclaimed property laws, and that congressional action would be needed. We thus support the SAFER Act, which would govern when a financial institution may treat investment account assets as abandoned and transfer them to a state for escheatment.[7] The SAFER Act, or similar legislation that preempts conflicting state laws and does not adopt an inactivity standard, would protect long-term investors from premature escheatment and provide needed clarity for investors, financial institutions, and regulators. We urge the Commission to support these legislative efforts and provide technical assistance to Congress.
Conclusion
The IAA appreciates the Commission’s recognition of the risk that state escheatment laws pose to long-term investors. For the reasons discussed above, we recommend that the Commission not adopt the proposed notification requirements and instead that it support congressional efforts to establish a uniform preemptive federal standard that better protects investors and their assets.
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Thank you for your consideration of our comments on this important issue. Please do not hesitate to contact the undersigned at (202) 293-4222 if we can be of further assistance.
Respectfully,
Gail C. Bernstein
General Counsel and Head of Public Policy
Sarah A. Buescher
Special Counsel
cc:
Honorable Paul S. Atkins, Chairman
Honorable Mark T. Uyeda, Commissioner
Jamie Selway, Director, Division of Trading and Markets
Brian Daly, Director, Division of Investment Management
[1] The IAA is the leading organization dedicated to advancing the interests of fiduciary investment advisers. For nearly 90 years, the IAA has been advocating for advisers before Congress and U.S. and global regulators, promoting best practices and providing education and resources to empower advisers to effectively serve their clients, the capital markets, and the U.S. economy. Our members range from global asset managers to the medium- and small-sized firms that make up the majority of our industry. Together, the IAA’s member firms manage more than $57 trillion in assets for a wide variety of individual and institutional clients, including pension plans, trusts, mutual funds, private funds, endowments, foundations, and corporations. For more information, please visit www.investmentadviser.org and see the IAA’s Investment Adviser Industry Snapshot.
[2] Transfer Agent Rules, 91 Fed. Reg. 56946 (Sept. 4, 2026), available at https://www.govinfo.gov/content/pkg/FR-2026-09-04/pdf/2026-18190.pdf.
[3] H.R. 8338, available at https://www.congress.gov/119/bills/hr8338/BILLS-119hr8338ih.pdf.
[4] Proposal at 56997. We also appreciate Director Selway’s recent remarks highlighting this concern. See Speech by Jamie Selway, Director, Division of Trading and Markets, “Transfer Portal” (Oct. 29, 2026), available at https://www.sec.gov/newsroom/speeches-statements/remarks-selway-sta-annual-conference-2026-102926.
[5] Id.
[6] See Letter from Shaun M. Snyder, Chief Executive Officer, National Association of State Treasurers, to Vanessa A. Countryman, SEC, Re: Proposed Amendments to Rule 17Ad-17 Regarding Transfer Agents, Brokers, and Dealers; SEC File No. S7-2026-30 (Oct. 28, 2026), available at https://www.sec.gov/comments/S7-2026-30/s7202630-1111379-3943430.pdf.
[7] Specifically, the SAFER Act would establish a federal standard that generally prohibits financial institutions from transferring an individual’s investment account assets to a state for escheatment while the individual is alive. It would also establish specific conditions that must be met before a deceased person’s investment account assets could be turned over to the state. The SAFER Act would expressly preempt conflicting state requirements.