How to Obtain a Medallion Signature Guarantee

In finance, a medallion signature is a special form of a certification stamp used for transfer of securities. It is an essential requirement when parties are trading stocks or bonds since it guarantees that the seller is genuine and that one is purchasing authorized shares. It also protects shareholders against any illegal transfers of their shares. The signature also comes in handy whenever an individual requests change of ownership of an investment account.

Acquiring a Medallion Signature Guarantee is not such a daunting task. Most financial institutions and brokerages provide Medallion Signatures to their existing customers normally via acknowledged programs. The US Securities and Exchange Commission recognize three programs, which are:

  • Securities Transfer Agents Medallion Program- Stamp. This program accommodates over 7000 Canadian and US banking institutions.
  • Stock Exchanges -Medallion Program- SEMP. Participants in this program include regional clearing and trust firms, as well as stock exchange member companies.
  • New York Stock Exchange Medallion Signature Program- MSP. The participants here are limited to NYSE member firms.

Medallion Programs are therefore only issued by financial institutions that are members of any of these programs. The signature, however, is not offered for free. Most of these firms charge fees to cover the liability risk they will face when offering the guarantee. Similarly, different companies have varying policies on the identifications required to provide the guarantee. It is very rare for any institution to offer the guarantee to an individual who is not their existing customer.

  • Individuals seeking to obtain the guarantee have to meet the following requirements:
  • Provide a valid government issued ID
  • Must be a member of a providing institution and have an account in good standing
  • Provide proof of ownership of securities. (A statement or Actual stock certificate)
  • Evidence of value
  • Must have verification of legal right to sign in case the owner is not present. (Death certificate, power of attorney or trust agreements are examples)

At one time or another, US citizens abroad may need to acquire a medallion signature guarantee. This has proven a hard nut to crack for most individuals and for this reason, with prior notice some financial institutions offer a substitution and accept a United States embassy seal instead. On the other hand, banking institutions with a correspondence relationship with a bank in the US might be given the permission to offer the guarantee to existing customers. For military personnel, the institutions might accept an alternative form of proof or waive the requirement entirely for small transfers.

The only time that you will not require a medallion signature guarantee to transfer shares is when your shares are registered in your brokerage “street name.” This can prove to be an easier way to initiate a transfer if you are not able to reach an institution offering the guarantee.

Since 2001, the New York Stock Exchange has been providing electronic transactions of shares which have significantly reduced the need for physical stock certificates. However, at one time or another, you might end up “discovering” old stock certificates stuffed in your family’s trunk. It is at this point that medallion signatures prove quite essential.

Getting a guarantee can prove to be quite a hassle since you will spend a reasonable amount of time, money and effort, but in the end, it is worthwhile. It will offer you indisputable cover and protection when conducting the transaction. Some of the transactions that can be endorsed by the guarantee include liquidation or transfer of ownership of:

  • Mutual funds
  • Bonds
  • Stocks
  • Unit Investment Trusts
  • Savings bonds

Finally, when acquiring a medallion signature guarantee, it is important to put into consideration whether you will transact immediately or you will keep the guarantee for later use. It is for this reason that it’s important that you ensure the guarantee is not dated since if it is dated, it is only usable for that date.

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I am discussing all kinds of business and finance topics on this blog and I hope that the information I provide will prove to be useful.