Late this summer, the Massachusetts Treasurer demanded mutual fund records on a nationwide basis as part of a multistate unclaimed property audit. Thirty-five (35) states are involved in the audit, but the Treasurer has sought records pertaining to all fifty (50) states.
The Massachusetts Treasurer and its auditor are requesting the names of Individual Retirement Account (IRA) owners in order to search the Social Security Administration’s Death Master File (DMF) for IRA owners who have died. Based on the approach auditors have taken in the life insurance context, it is expected that Massachusetts’ auditor will attempt to match the information against the DMF using never-explained and little-understood fuzzy match criteria, which will inevitably produce false positives. The auditor will likely then argue that the mutual fund should undertake an investigation to prove that the purportedly identified IRA owners are not, in fact, deceased. If the mutual fund does not respond with proof that the IRA owners are alive, the auditor will likely contend that the proceeds in the IRAs are unclaimed property, which the mutual fund allegedly should have scheduled for escheat to the state. This audit approach, typically applied in life insurance unclaimed property audits, may now also be applied in the mutual fund/IRA context, raising challenging and novel issues of legal interpretation in this evolving area.