Medallion Signature Guarantee: What Is It and Why Do I Need It?
Written By: Josephine Reviello, Case Manager
If you have stock certificates in your safe deposit box and you want to transfer or sell them, you will have to sign the certificates or a document called a security power, more commonly known as a stock power form. But, did you know, that for your protection, you would also need to have your signature "guaranteed" before the stock can be transferred to another owner?
A Medallion Signature Guarantee is a special signature guarantee used when transferring securities (a tradable asset of any kind, such as stock, bonds, etc.). The medallion stamp or imprint can be provided by many financial institutions (banks, broker dealers, credit unions, and savings associations) and indicates that the financial institution guarantees the signature is genuine and accepts liability for any forgery. The financial institution providing the medallion signature guarantee must be a participant or member of one or more of the three Medallion Signature Guarantee programs: Securities Transfer Agents Medallion Program (STAMP); Stock Exchanges Medallion Program (SEMP); and New York Stock Exchange Medallion Signature Program (MSP). Participating financial institutions can guarantee the authenticity of their customers’ signatures.
The reasoning behind obtaining a Medallion Signature Guarantee stamp is to protect the customer against forgery of his or her signature and limit the liability of institutions which process these forms, i.e., transfer agents. Although it is an inconvenience, the stamp protects the stock owner by making it hard for other people to forge a signature that could result in the owner losing money. And transfer agents require Medallion Signature Guarantees to limit their liabilities and losses if the signature does turn out to be forged. That liability lies on the financial institution that accepted that signature and put the Medallion Signature Guarantee stamp on the paperwork.
Usually, the cost for this type of stamp is minimal and it may even be free of charge if you are already a customer of the participating financial institution. If you are not an existing customer and do not have a relationship with the participating financial institution, they may choose not to provide this service.
A notary stamp or seal is NOT the same as a Medallion Signature Guarantee stamp. Nor is a notary stamp or seal a substitute for a Medallion Signature Guarantee. Notaries are state government officials who verify the identity of signers and witnesses to documents. A notary cannot take financial responsibility like a financial institution does when providing a Medallion Signature Guarantee.