SACRAMENTO, California — Proposed legislation to streamline California's ability to seize abandoned stocks and mutual funds is drawing opposition from business groups and dividing Democratic lawmakers.

State Controller Malia Cohen sponsored Assembly Bill 1447, which seeks to define the process for California to take custody of securities when the owner is deemed absent.

Under current law, securities are declared abandoned and able to be confiscated by the state if the owner hasn't logged onto an account, or shown an interest, such as inquiring about their holding, for three years.

AB 1447 adds new language that includes the requirements for escheatment, the transfer of assets to the state, are that "an owner does not respond to the notice" sent by the securities holder, either by mail or electronically, about their asset.

Cohen's office said in a statement that its bill "clarifies existing law and establishes a consistent, common-sense standard for determining whether an owner remains connected to a securities account."

At least one Democratic lawmaker and several securities companies want any new law to state that securities holders tried to contact the owner through the U.S. Postal Service, and, the mail was returned as undeliverable, which Cohen's office opposes including in the measure.

The state has some $15 billion in unclaimed property, including securities, such as stock holdings, mutual funds, and retirement accounts.

The state holds seized securities for 18 months, at which point they are required to be sold and the proceeds transferred into the state's general fund. They can be returned the owner after a detailed application process.

Assembly Bill 1447, authored by Assemblymember Mike Gipson, D-Carson, is expected to be heard in the Senate Judiciary Committee in the coming days.

In an Aug. 11 letter to state Sen. Tom Umberg, chair of the Senate Judiciary Committee, Investment Company Institute, a trade group for the asset management companies, argued AB 1447 would make it easier for the state to seize property.

ICI wrote that Florida enacted a measure and "prematurely" allowed over $1 billion in securities to escheat to the state.

"If AB 1447 is enacted, California would repeat the Florida mistake and become the most aggressive state in the country for escheating securities," said the letter, which was also signed by the California Chamber of Commerce and other business groups.

A bill to require the "return to post office" standard, sponsored by ICI and authored by Assemblymember Cottie Petrie-Norris, D-Irvine, died in the Senate Appropriations Committee earlier this month.

An analysis by the Senate Appropriations staff predicted a loss of up to $735 million to the general fund in the short-term under Pettrie Collins' bill. ICI disagrees with analysis, arguing the bill would have had a negligible impact on state revenue.

ICI also takes the position that existing state law already includes the "return to post office" standard, which is at odds with the controller's view.

The ICI sued the controller's office in 2021 in Sacramento Superior Court court over the issue. A settlement followed, and a judge in 2024 ordered the state and ICI to come to an agreement, which has yet to happen.

Pettrie Collins, in an interview this week, called the returned mail provision in her now- defunct bill "the most protective for Californians and the most protective for Californians' assets and investment accounts."

Cohen's office, in a statement, said "California should not pretend an owner has been found merely because the mail was not returned."

The office also expressed concern that fees by a securities holder would diminish a forgotten account.

California faces long-standing criticism that the state isn't doing enough to return seized assets to its owners.

Cohen, a Democrat, faces challenger Herb Morgan, a Republican from San Diego, in the Nov. 3 election. Morgan also opposes Cohen's bill.

Morgan, a onetime chief investment officer at financial services firm, said that the controller's job is "to return assets" and not make "reunification more difficult while the state continues treating unclaimed property as a revenue stream."

National lawmakers are watching as states consider new rules.

U.S. Rep. Sam Liccardo, D-San José, in April introduced a bill that would require that a financial institutional confirm the death of an individual before their securities can be seized by the states.

Liccardo told the Times that he introduced his bill after learning about a Delaware man who bought about $6,000 worth of Amazon stock in the late 1990s. The state of Delaware wrongly seized and liquidated his stock after the man didn't log into his trading account for years.

The stock would have been worth $100,000 if the state hadn't seized it, according to a NPR report on the incident.

"Americans invest for retirement expecting their assets will grow if they don't touch them, and that growth belongs in their pockets — not government coffers," said Liccardo.

U.S. Sen. Elizabeth Warren, D-Massachusetts, a ranking member of the Senate Banking, Housing, and Urban Affairs Committee, in April is also seeking data about states' new escheatment laws.

"While some property is legitimately abandoned, many individuals have simply forgotten about their property entirely, do not know the money exists, or do not know that they can claim it," Warren wrote in in a letter this spring to the National Association of Unclaimed Property Administrators (NAUPA).

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