Medallion Signature Guarantees

Transfer agents and issuers of securities, pursuant to the Uniform Commercial Code, may require a guarantee of the validity of the signature of the person transferring the securities in order to prevent a fraudulent transfer. The Securities and Exchange Commission has designated institutions that may issue such guarantees, and the Securities Transfer Association has developed the Medallion Signature program for those institutions to follow in guaranteeing signatures.

Securities may be held in the name of the owner of the securities or in “street” name. Securities held in “street” name are held in the name of a brokerage firm for the benefit of the investor in the securities. Securities in “street” name do not need signature guarantees in order to be transferred. However, in order to reduce the possibility of fraud, signatures transferring securities held in physical form by investors must be guaranteed.

Transfer agents require signature guarantees in order to avoid liability and losses if a signature is forged. In the event of a forgery, the guaranteeing institution assumes financial responsibility in the event of a fraudulent transfer.

The Securities and Exchange Commission has defined the types of institutions eligible to provide signature guarantees to include commercial banks, savings banks, credit unions, and broker dealers that participate in one of the Medallion Signature Guarantee programs. Such programs include:

  • STAMP, the Securities Transfer Agents Medallion Program participated in by thousands of financial institutions in the United States and Canada;
  • SEMP, the Stock Exchanges Medallion Program; and
  • MEP, the New York Stock Exchange Medallion Signature Program.

The Medallion programs do not provide a notarization of a signature. Indeed, transfer of stock certificates with notarized but not guaranteed signatures may be rejected by a transfer agent.

Guarantees normally are not dated unless they are meant to be effective only for a particular day. A dated guarantee is good only for the day of its date. While guaranteed signatures are required for stock certificate transfers, such signatures do not affect whether additional documentation such as corporate resolutions, death certificates, or tax waivers may be necessary to complete the transfer.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.