A struggling broker-dealer’s efforts to close all of its retail customer accounts by applying theories of abandonment, including mischaracterizing securities as “worthless” and making misstatements with respect to state unclaimed property processes, resulted in a complete victory for the SEC in federal court litigation in Nevada on September 30, 2025.1 The court decision provides a striking example of the misapplication of escheatment laws and the severe consequences for a firm that manipulates unclaimed property procedures to serve its own business interests.
Background
In 2018, Alpine Securities Corporation, a self-clearing broker-dealer and FINRA-member firm located in Utah, began its efforts to close all of its retail customer brokerage accounts. Alpine’s business primarily involved clearing microcap stocks—low-priced shares of small companies that generally trade over the counter. After reporting significant losses in the second and third quarters of 2018, the firm increased its retail customers’ account fee from $100 per year to $5,000 per month and, more significantly, without customer consent, began to sell securities in customer accounts to itself for $0.01, based on Alpine’s characterization of the securities as “worthless.” As part of this process, Alpine notified some, but not all, of its customers that it deemed securities to be worthless if the position in the customer’s account was below $1,500.
Abandonment Without Analysis
In addition to selling customer positions to itself, in early 2019, Alpine created holding accounts on its books and records for each of the 50 states in order to segregate and track customer assets for purposes of eventually transferring customer assets to the states as unclaimed property. Alpine created internal account numbers for these accounts that began with “1122” (1122 Accounts). Later that year, all remaining customers’ securities positions were moved to the 1122 Accounts for the state corresponding to the customer’s address. These transfers consisted of 645 positions held by approximately 545 retail customers, with a combined statement value of more than $54 million.
No actual analysis was performed to determine whether the positions moved to the 1122 Accounts qualified as “inactive” or “abandoned” under the customer agreement or state law. This wholesale designation of accounts as abandoned—without any individualized assessment—violated both the broker-dealer’s own policies and the fundamental principles of state unclaimed property law. The broker-dealer had policies in its written supervisory procedures covering lost security holders that required, among other things, two attempts to contact customers who are natural persons and two searches using information databases. The broker-dealer disregarded these procedures entirely, treating the unclaimed property process as a mechanism for account closure rather than a procedure for protecting genuinely abandoned customer assets. Although it typically takes three to five years to deem an account abandoned, the broker-dealer ignored these statutory time frames, using the unclaimed property framework as an immediate solution to eliminate unwanted retail customers.
Misleading Representations
The court also found that Alpine compounded its violations through affirmative misrepresentations. One customer notice stated that “all remaining positions” will be moved to a holding account “pending escheatment to the appropriate state,” which the court found constituted a false statement because there was no effort to determine whether any of the 645 positions had truly been abandoned by the customers. Also, the firm created an auto-reply message giving the false impression that customer property had already been transferred to state authorities when the property was still being held by the company. This misdirected customers about where to recover their assets.
Ultimately, the court found that designating accounts as abandoned was part of an overall scheme to force sales, because once customers complained, the firm would agree to restore their position only if the customer agreed to take possession of the securities or to sell the position. This quid pro quo arrangement demonstrated that the unclaimed property process served as leverage to accomplish the broker-dealer’s business objective of closing retail accounts.
Key Takeaways
The decision provides several compliance lessons for broker-dealers and financial services companies, including the following.
“Worthless” security designations require genuine market analysis. Securities should not be deemed worthless based solely on internal fee calculations or administrative convenience.
Unclaimed property regulations require account-by-account analysis. Unclaimed property compliance requires conducting a reasonable, good faith analysis to determine which accounts are abandoned. Firms cannot make wholesale declarations that entire categories of accounts are “abandoned” when there is no analysis to support that.
Unclaimed property processes cannot be weaponized to accomplish business objectives. Unclaimed property laws are designed to protect owners and ensure that genuinely abandoned assets are held for their rightful owners by the states. Unclaimed property processes are not mechanisms to force account closures, pressure customers into liquidating positions, or otherwise dispose of unwanted accounts.
Representations to customers about property location and status must be accurate. Misleading statements, such as implying assets have been escheated when they remain under firm control, may violate anti-fraud provisions and inhibit customers from reclaiming their property.
For financial services firms contemplating business line exits or account rationalization strategies, this case illustrates that unclaimed property laws provide a framework for protecting abandoned customer assets, not a shortcut for eliminating unwanted accounts.
1 US Securities and Exchange Commission v. Alpine Securities Corp., No. 2:22-cv-01279-RFB-MDC (D. Nev. Sept. 30, 2025).
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