WASHINGTON -- Legislation that would retroactively change the way unclaimed distributions of interest, principal, and dividends made by issuers of municipal bonds and other securities are returned to states was approved by the House Banking Committee's financial institutions subcommittee yesterday.

The compromise bill, which would apply to distributions made after June 21, 1991, would also lessen the liability of bond brokerage firms and other financial intermediaries that hold such assets. The measure, which now goes to the full committee, would allow such institutions to transmit unclaimed funds to central repositories after three years. The state-designated clearinghouses would then remit the funds to states.

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