A bipartisan group of U.S. lawmakers is pushing new legislation that could reshape how states handle dormant investment accounts, addressing concerns that long-term investors may lose years of market gains under existing unclaimed property laws. Backed by the Investment Company Institute (ICI), the proposed Safeguarding American Funds from Escheatment and Revenue (SAFER) Act aims to establish federal standards preventing states from treating inactive—but actively owned—investment accounts as abandoned property.

Millions of Americans follow a familiar investment strategy: contribute regularly, invest for the long term, and avoid unnecessary trading. Financial advisers have long encouraged this buy-and-hold approach as a cornerstone of wealth creation. Yet under unclaimed property laws in several U.S. states, prolonged inactivity on an investment account can trigger an unexpected outcome—state seizure through a legal process known as escheatment.

That concern has become the focus of a bipartisan legislative effort in Washington. Representatives Sam Liccardo (D-California) and Mike Lawler (R-New York) have introduced the SAFER Act, legislation designed to create uniform federal protections for investment accounts that remain inactive but are not abandoned.

The proposal has gained support from the Investment Company Institute (ICI), which argues that inconsistent state laws create uncertainty for investors and financial institutions while undermining long-term investment strategies.

Why the SAFER Act Matters

The legislation addresses a growing issue within the intersection of financial regulation, investment management, and consumer protection.

Current unclaimed property laws vary widely by state. In some jurisdictions, an investment account that shows little or no activity for several years may be presumed abandoned. States can then assume custody of the assets, often liquidating securities before transferring proceeds into unclaimed property programs.

According to ICI President and CEO Eric Pan, this process can significantly reduce long-term investor returns. If investments are sold during escheatment, owners who later reclaim their assets typically receive only the account’s value at the time of liquidation—not any market appreciation that occurred afterward.

For retirement accounts, forced liquidation may also create unexpected tax liabilities, adding another layer of financial risk.

With more than 128 million Americans invested in regulated investment funds, according to ICI, the organization argues that modern investment behavior no longer aligns with inactivity-based abandonment rules. Long-term investing often involves years without account transactions, particularly as digital account access and automatic investment plans become more common.

A Patchwork of State Regulations

The proposed legislation seeks to replace a fragmented regulatory landscape with consistent national standards.

Supporters argue that the current state-by-state framework creates operational complexity for asset managers, brokerages, and custodians responsible for monitoring dormant accounts while complying with different reporting requirements across jurisdictions.

The SAFER Act would establish federal safeguards preventing inactivity alone from serving as evidence that an investment account has been abandoned. Before initiating escheatment proceedings, states would need to verify that the account owner is deceased and confirm that no estate or beneficiary has claimed ownership.

The bill would also require investment assets to remain invested rather than being liquidated until abandonment can be legally established.

For financial services firms, standardized federal requirements could simplify compliance while reducing legal uncertainty surrounding dormant account management.

Industry Implications for Wealth Management

The debate reflects broader trends across wealth management and digital investing.

Technology platforms offered by firms such as Charles Schwab, Fidelity Investments, Vanguard, and fintech providers increasingly encourage automated investing, passive portfolio management, and long-term retirement savings. Robo-advisors and digital investment platforms often require little ongoing customer interaction beyond periodic account reviews.

As financial institutions continue adopting cloud-based infrastructure, digital identity verification, and automated compliance systems powered by technologies from companies including Microsoft, Google Cloud, Amazon Web Services (AWS), and Salesforce, regulatory frameworks are also evolving to reflect changing investor behavior.

Industry observers note that inactivity is no longer a reliable indicator of abandonment in an era where investors monitor portfolios through mobile applications without executing frequent trades.

The Walter Schramm Case Highlights the Debate

Supporters of the legislation frequently reference the case of investor Walter Schramm, whose experience illustrates the potential consequences of current state laws.

Schramm reportedly purchased Amazon shares during the late 1990s and left the investment untouched as part of a long-term strategy. Delaware later classified the account as abandoned and liquidated the holdings in 2008 when they were valued at approximately $8,000. By the time Schramm became aware of the liquidation years later, the shares would reportedly have been worth roughly $100,000.

While lawmakers cite the case as evidence of systemic shortcomings, proponents argue the broader issue extends beyond individual investors to confidence in long-term retirement and wealth-building strategies.

Market Landscape

The proposal arrives as retail investing reaches historically high participation levels and digital investment platforms continue expanding access to capital markets.

According to Statista, retail participation in investment markets has increased steadily over the past decade, supported by digital brokerage platforms and retirement investing. Meanwhile, McKinsey & Company has identified investor trust and regulatory modernization as critical priorities for financial institutions adapting to increasingly digital customer experiences.

If enacted, the SAFER Act could establish a national framework balancing consumer protection with legitimate state unclaimed property programs while reducing compliance complexity for investment firms operating across multiple jurisdictions.

The legislation also reflects a growing policy focus on protecting long-term investment strategies as passive investing continues to become the dominant approach for retail investors.

Top Insights

• The bipartisan SAFER Act would prevent states from treating investment account inactivity alone as evidence of abandonment, strengthening protections for millions of long-term investors.
• The proposal requires states to verify an account owner’s death and confirm beneficiary status before initiating escheatment proceedings involving investment accounts.
• Asset managers, brokerages, and custodians could benefit from standardized federal rules that simplify compliance across multiple state jurisdictions.
• Supporters argue forced liquidation during escheatment can erase years of investment growth while creating unexpected tax consequences for retirement account holders.
• The legislation reflects broader financial industry efforts to modernize regulations around passive investing, digital wealth management, and long-term retirement savings.

Get in touch with our fintech expert