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Delaware General AssemblyDelaware RegulationsMonthly Register of RegulationsApril 2017


Regulatory Flexibility Act Form

Authenticated PDF Version

In compliance with the State’s Administrative Procedures Act (Title 29, Chapter 101 of the Delaware Code) and under the authority of 12 Del.C. §1132, the Delaware Department of Finance’s Office of Unclaimed Property, State Escheator, proposes to revise and replace its regulations related to its Abandoned or Unclaimed Property Law.
In accordance with 29 Del.C. §10116, persons wishing to submit written comments, suggestions, briefs, and compilations of data or other written materials concerning the proposed regulations should direct them to the following address:
Notice may also be directed via electronic mail to david.gregor@state.de.us. Any written submission in response to this notice and relevant to the proposed regulations must be received by the Department of Finance no later than 4:30 p.m. EST, Wednesday, May 3, 2017.
Delaware Code, Title 12 §1132
On January 29, 2015, the Governor of Delaware signed into law Senate Bill 11 of the148th General Assembly, which directed the Delaware Secretary of Finance to complete the development of a detailed manual containing procedural guidelines for the conduct of Delaware unclaimed property examinations.
On February 2, 2017, the Governor of Delaware signed into law Senate Bill 13 of the 149th General Assembly, which revised and updated the Delaware Abandoned and Unclaimed Property Law. Section 1176(b) directed the Secretary of Finance, in consultation with the Secretary of State, to promulgate regulations to create consistency in any examination or voluntary disclosure.
12 DE Admin. Code 100, Regulation on Practices and Procedures for Appeals of Determinations of the Audit Manager
12 DE Admin. Code 101, Regulation on Practice and Procedure for Establishing Running of the Full Period of Dormancy for Certain Securities and Related Property
12 DE Admin. Code 102, Regulation on Practices and Procedures for Records Examinations by the State Escheator
12 DE Admin. Code 103, Abandoned or Unclaimed Property Examination Guidelines
Abandoned or Unclaimed Property Voluntary Disclosure Agreement and Audit Program, 9 DE Reg. 771 (11/01/05). Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program, 10 DE Reg. 699 (10/01/06) (Final). Regulation on Practices and Procedures for Appeals of Determinations of the Audit Manager, 15 DE Reg. 1323 (03/01/12) (Final).
2.1 Preface
2.2 Guiding Principles
2.3 Effective Date
2.4 When property presumed abandoned
Line 2 COGS
+ Line 27 Total Deductions
- Line 19 Charitable Contributions
Maximum Cost in Dollars
The Maximum Cost in Dollars divided by Line 1 Gross Receipts equals the Maximum Cost as a Percentage of Gross Receipts.
2.5 Indication of Owner Interest in the Property
2.6 Report Required by Holder
2.7 When Report to be Filed
2.8 Address of owner to establish priority
2.9 Retention of Records by Holder
2.10 Authority to Conduct Abandoned Property Examinations
2.11 Examination of Holders
2.12 Notice of Examination
The State is hereby requesting that you issue a hold notice so that all records are retained, including, but not limited to, bank statements, bank reconciliations, outstanding check lists, detail general ledgers, aged accounts receivable reports, and if applicable, information surrounding gift certificate issuances and redemptions. The State requests that all records will be retained, notwithstanding any [Company Name] record retention policies to the contrary, until the examination is completed. See 12 Del.C. §1145. Your cooperation in making necessary records available for both past and present years for the purposes of determining [Company Name] compliance with the Law will facilitate the completion of the examination. In addition to specific document requests that will be forthcoming, please have available all of [Company Name] prior years' reports of unclaimed property and supporting documentation for all states, including Delaware. You will be advised throughout the course of the examination of what records will be required to complete the review.
2.13 Third-Party Advocates
2.14 Confidentiality and Non-Disclosure Agreement ("NDA")
1. Introduction. [INSERT AUDITOR NAME] is a contract auditor that has been authorized to conduct an unclaimed property examination (the "Examination") of the Holder by the state(s) identified on Exhibit A (hereinafter a "Participating State" or collectively, the "Participating States," and shall, upon written consent of the Holder, include any additional state or jurisdiction that may, during the course of the Examination, authorize [INSERT AUDITOR NAME] to act as its agent and to perform an unclaimed property examination of the Holder) to determine the Holder's compliance with the Participating State(s)' unclaimed property laws, rules, and regulations. Upon receipt of any subsequent examination authorization letter, [INSERT AUDITOR NAME] shall obtain written consent from the Holder to add such state to the list of participating states attached hereto at Exhibit A.
2. Confidential Information, defined. During the course of the Examination, [INSERT AUDITOR NAME] may have access to, or receive, confidential and/or proprietary information concerning the Holder including, but not limited to, materials relating to the administration of the Holder's business, operations, unclaimed property procedures and practices; financial information and/or accounting records; information regarding the Holder's current and former shareholders, members or partners, principals, directors, officers, employees, retirees, beneficiaries, customers, consumers, vendors, contractors, agents and other such representatives; and/or any other materials or information disclosed by the Holder or its principals, partners, directors, officers, employees, agents, consultants, advisors, legal counsel, accountants, and other such representatives (collectively "Representatives") to [INSERT AUDITOR NAME] and its Representatives in connection with the Examination. The Parties agree that all such information, including any materials derived therefrom, whether disclosed orally or in written (including electronic) form or otherwise, shall be considered proprietary and confidential and shall hereinafter be referred to as "Confidential Information". Confidential Information shall also include any report filing, voluntary self-disclosure agreement, or settlement agreement resulting from the Holder's reporting of any unclaimed property as well as any settlement, payment(s), or other interim or final resolution of the Examination. Confidential Information shall not include information or materials that are: (i) in the public domain not as a result of the violation of the undertakings herein; (ii) available to [INSERT AUDITOR NAME] on a non-confidential basis prior to the Holder's disclosure of it to [INSERT AUDITOR NAME], or (iii) hereafter made available to [INSERT AUDITOR NAME] on a non-confidential basis from a source other than the Holder, provided that such source in so acting is not violating any duty or agreement of confidentiality.
3. Non-Disclosure. [INSERT AUDITOR NAME], in receiving Confidential Information from the Holder or its Representatives, will preserve the confidentiality of such Confidential Information and shall:
4. Records Retention. [INSERT AUDITOR NAME] shall retain the audit work papers (which may include the Confidential Information) in a secure environment for no longer than the period of time specified under the laws, rules or regulations of the Participating State(s) or [INSERT AUDITOR NAME]'s contract with the Participating State(s), whichever is longer, at which time the records (inclusive of any Confidential Information) shall be destroyed; and [INSERT AUDITOR NAME] shall certify in writing as to such destruction to the Holder using the following contact information:
5. Compelled Disclosure. If [INSERT AUDITOR NAME] shall be under a legal obligation, including but not limited to a subpoena or request by a court or any government entity or required in response to any applicable "freedom of information" request to disclose any Confidential Information to a third party, [INSERT AUDITOR NAME] shall give the Holder prompt notice thereof so that the Holder may timely object to the disclosure of such Confidential Information, seek a protective order, or waive [INSERT AUDITOR NAME]'s duty of non-disclosure. [INSERT AUDITOR NAME] shall reasonably cooperate with the Holder to the extent that it seeks a protective order or to otherwise object to the requested disclosure of the Confidential Information. Furthermore to the extent that the Holder seeks a protective order or objects to the requested disclosure and [INSERT AUDITOR NAME] is subsequently required to disclose by court order or governmental mandate any Confidential Information, or in the event Holder fails to act within a reasonable time period after receipt of [INSERT AUDITOR NAME]'s notice and/or affirmatively waives [INSERT AUDITOR NAME]'s duty of non-disclosure, and [INSERT AUDITOR NAME] is legally required to disclose any Confidential Information pursuant to this Section 5, [INSERT AUDITOR NAME] shall do so without liability under this Agreement.
6. Compliance With Applicable Laws. [INSERT AUDITOR NAME] represents and warrants that it has technical and organizational measures in place that (i) comply with all Applicable Laws; and (ii) meet or exceed the ISO/IECC 27002 information security controls standard to ensure the security and confidentiality of the Confidential Information in order to prevent, among other things: (a) accidental, unauthorized or unlawful destruction, alteration, modification or loss of the Confidential Information; and (b) accidental, unauthorized or unlawful disclosure or access to the Confidential Information. [INSERT AUDITOR NAME] warrants and represents that it shall maintain its security measures in accordance with: (i) the Applicable Laws; and (ii) the standards expressly represented in the INFORMATION SYSTEMS CERTIFICATION which is attached hereto and incorporated herein by reference at Exhibit B. For purposes of this Agreement, the term "Applicable Laws" shall mean all applicable state and federal laws, rules, and regulations governing the protection of Confidential Information (inclusive of Personally Identifiable Information) including, without limitation, 12 Del. Code Ann. §1189 and Del. Code Ann. tit. 6 §§ 12B-101 et. seq., as such laws, rules and regulations may be amended from time to time. In the event [INSERT AUDITOR NAME] is required to notify the Holder under any Applicable Law concerning any unauthorized access to, destruction, modification, disclosure or use of any Information (hereinafter a "Security Incident"), [INSERT AUDITOR NAME] shall: (a) provide such written notice promptly and without undue delay in accordance with the applicable legal authority; (b) take all remedial action required under Applicable Law to investigate and remediate any loss of the Information; (c) reasonably cooperate with Holder in promptly responding to all third party inquiries (if any) regarding the Security Incident; and (d) refrain from issuing any press release, providing any breach notification to individuals, or making any other public announcement concerning the Security Incident without the prior written approval of Holder (which approval shall not be unreasonably withheld, conditioned or delayed); provided, however, no written approval from Holder shall be necessary where [INSERT AUDITOR NAME] is required to act at the direction of law enforcement and/or other governmental personnel and such written approval is unreasonable under the circumstances and/or would result in [INSERT AUDITOR NAME]'s non-compliance with the directive.
7. Remedies. [INSERT AUDITOR NAME] acknowledges that Holder would suffer irreparable harm if its Confidential Information were disclosed or used in violation of this Agreement, and that monetary damages would be an insufficient remedy for such unauthorized disclosure or use. Accordingly, in addition to whatever right the Holder may have to obtain an award of damages or other relief upon [INSERT AUDITOR NAME]'s breach of this Agreement, the Holder may obtain an injunction or other equitable relief to protect its Confidential Information disclosed or used in violation of this Agreement.
8. Application of Agreement. This Agreement shall apply solely to the Examination and shall not be construed to permit the disclosure of any Confidential Information to any other state or jurisdiction not listed on Exhibit A, absent the express written consent of the Holder. This Agreement may not be canceled or modified, nor any of its provisions be waived, except in writing signed by the Parties hereto or, in the case of a waiver, on behalf of the Party making the waiver. This Agreement constitutes the entire agreement and understanding of the Parties hereto and supersedes any and all prior agreements and understandings relating to the subject matter hereof. If it is found in a final judgment by a court of competent jurisdiction that any term or provision hereof is invalid or unenforceable: (i) the remaining terms and provisions hereof shall be unimpaired and shall remain in full force and effect; (ii) the invalid or unenforceable provision or term shall be stricken from this Agreement and the validity, binding effect and enforceability of the remaining provisions of this Agreement shall not be affected or impaired in any manner.
2.15 Opening Conference
2.16 Scope of Examination
2.17 Examination
2.17.5 The auditor shall submit record requests to the Holder in writing, or if the request is made verbally, shall follow up with written documentation of the request. The auditor shall provide a reasonable timeframe for the Holder to respond to the request based on the type and extent of the information requested and other relevant facts and circumstances. The Auditors shall provide confirmation of receipt with projected response times to submissions received from the Holder.
2.18 Estimation
2.19 Projection
2.20 Complete and Researchable Records
2.21 Reportable Property Types
Commonly reported types of Unclaimed Property along with the National Association of Unclaimed Property Administrators ("NAUPA") Property Type Codes with Applicable Dormancy Periods are as follows:
2.22 Remediation
2.22.1 Holders will be given the opportunity to review, reconcile, remediate and perform remediation outreach on any items that have been identified as potential unclaimed property. The form of the outreach letter must be approved by the State, and all letters shall be submitted to the Auditors for review and approval prior to sending out. The Holder must provide confirmation of the date of the outreach mailing to the auditor.
2.22.2 The following in an example of a “remediation outreach” letter approved by the Department of Finance:
Dear <Owner>,
Our records indicate that the check detailed below, issued to <Owner>, has not cleared the bank. In order for us to determine whether this obligation is still due and owing or whether the obligation may have been satisfied, we are requesting that you please review your records and respond back to us as to your findings. After reviewing your records, complete the form below and return it to us within 15 days. If your address has changed, please provide the new address as well as a telephone number.
If a response is not received, state unclaimed property laws may require us to remit the funds to the state of your last known address (i.e. the state listed on the address block of this letter). That state will hold the funds in perpetuity or until you claim the funds from the state.
2.23 Bankruptcy
If at any time before or during the course of an examination the Holder files for bankruptcy, the Holder shall give notice of the filing to the auditor. The auditor will, within seven (7) calendar days of the Holder’s notice or the discovery of the event, notify the State of the bankruptcy filing. The auditor will assist the Escheator to ensure that a proper proof of claim is filed timely in the bankruptcy action.
2.24 Statement of Findings and Request for Payment
2.24.1 If the Audit Manager determines at the conclusion of the examination that the Holder has not reported or has underreported the amount of unclaimed property due to the State, the State will issue a statement of findings and request for payment to the Holder. This letter will outline the findings of the examination and make a formal demand for the property under question. The Holder has ninety (90) days to directly remit to the State of Delaware any abandoned property identified during the examination as owed to the State of Delaware. The Holder’s appeal rights to contest all or part of the findings as outlined in 12 Del.C. §1179 are triggered by the statement of findings and request for payment.
2.24.2 The State may, at the Holder’s request and/or agreement, bifurcate or divide the examination by property type and year and issue a statement of findings and request for payment for a portion or portions of the examination while other portions of the examination remain ongoing. An examination is deemed to be complete for any category of property as of the date on which the Audit Manager mails the statement of findings and request for payment as described in 12 Del.C. §1156(a) for that category of property and time period.
Last Updated: December 31 1969 19:00:00.
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