Abby Cowart, Executive Director, SSA Shareholder Services Association Webinar: Leading Practices for Unclaimed Property Audits Welcome: Abby Cowart, Executive Director, SSA Moderator: Melissa Tinker Community National Bank Presenters: Freda Pepper William King Reed Smith LLP KPMG LLP

DISCLAIMER The information provided in this webinar represents the current understanding of the presenters and the Shareholder Services Association. It is subject to change. In no way should this information be construed or relied upon as legal or operational advice. You should consult with your own legal counsel, compliance officer and/or other subject matter experts.

KPMG Presentation Disclaimer The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. KPMG does not provide legal services.

UP Audit Overview Most states utilize third-party auditors to conduct examinations Compensation schemes vary, but auditors may be compensated based upon findings Frequently, challenging and time consuming to complete Extensive look-back periods with risk of substantial penalty and interest

History 1.) Securities Review added to general ledger (GL) exam (c. 2011) 2.) Examinations via transfer agent records (c. 2014 – present) 3.) Broker/Dealer exams, use of the DMF, and new issuer-direct audits (2015-present) 4.) Securities audits accompanying GL exams (present)

Benefits to the States “New” source of review/revenue Ability to test new theories of determining liability Foreign Perhaps less contentious (no estimation) Approach was to audit a few record keepers at one time (efficient)

Risks for Issuers Reputational risks Time and resources Shareholder retention Wrongful escheat lawsuits Time and resources Broad and burdensome record requests Financial downsides Audit expansion

Leading Practices to be Prepared Notify internal parties Secure NDA Ensure data security controls Review statutory and regulatory guidelines in participating states Confirm audit scope Stay on top of deadlines and commitments

Leading Practices to be Prepared (contd.) Stay ahead of auditor techniques and methodologies Review materials provided by third parties before sending Seek second opinions Seemingly innocuous requests may not be

Sample Requests Shareowner registration information including first name, last name, middle initial, secondary owner information, full mailing address, TIN, account number for all current registered shareholders for restricted and unrestricted classes Date account was opened, most recent contact dates, undeliverable dates, electronic correspondence indicator, outstanding payment information

Sample Requests (contd.) Detailed mailing information (type, frequency, method, “responsible party” Transfer agent agreement Detailed information on acquisitions and un-exchanged shareholders Owner location programs ESPP and restricted stock

Audit Resolution Preliminary reports and assessments Remediation Final audit assessments Birfurcate property types Settlements and appeals Closing

Questions William King Freda Pepper KPMG LLP Reed Smith LLP Ph: 202-390-0962 Email: williamking@kpmg.com Ph: 215-851-8876 Email: fpepper@reedsmith.com

Save The Dates April 12 2:00 pm. Webinar: Overview of Section 16 Reporting May 9 2:00 pm. Webinar: Annual Conference Preview Details can be found at www.shareholderservices.org

2018 Annual Conference July 17-19, 2018 Newport Beach, California