A Medallion Signature Guarantee is a special certification stamp that guarantees a signature authorizing an authentic transfer of securities. This guarantee is predominantly used in financial and investment sectors to ensure the legitimacy of transactions involving stocks, bonds, and other securities.
What is a Medallion Signature Guarantee?
A Medallion Signature Guarantee is a certificational validation provided by financial institutions, like banks, credit unions, and certain brokerage firms. It certifies that the signature authorizing a security transfer is genuine, protecting against forgery or unauthorized transactions.
The stamp ensures that the financial institution takes responsibility for verifying the identity of the signer and guarantees that the signer has the legal authority to initiate the transaction.
Types of Medallion Signature Guarantees
STAMP (Securities Transfer Agents Medallion Program):
- Primarily used by transfer agents and eligible institutions qualified under the STAMP system.
Securities Exchange Medallion Program (SEMP):
- Used mainly by broker-dealers and clearing agencies.
NYCE’s (New York Stock Exchange) Medallion Guarantee Program (NYSE MGP):
- Utilized by members of the New York Stock Exchange.
Special Considerations
Limitations of Coverage: Each Medallion stamp carries a surety limit that defines the maximum value of the securities it guarantees. It’s essential to ensure the value of the transaction does not exceed the surety limit.
Specific Institutions: Only select financial institutions are authorized to issue Medallion Signature Guarantees. It’s important to contact your bank or credit union to verify their participation.
Examples of Usage
Stock Transfers: When transferring ownership of stocks from one person to another, a Medallion Signature Guarantee is required to validate the transaction.
Mutual Fund Redemptions: Redeeming mutual fund shares often requires a Medallion Signature Guarantee to prevent fraud.
Bond Certification: When certifying the transfer of bonds, the guarantee serves as proof of authenticity and authorization.
Historical Context
The Medallion Signature Guarantee was introduced to increase security in the financial markets, ensuring that securities transactions were carried out legitimately and reducing the risk of fraud.
Where to Get a Medallion Signature Guarantee
Banks and Credit Unions
Many banks and credit unions offer Medallion Signature Guarantees to their customers. It is advisable to contact your local branch to ensure the service is provided and to understand any applicable fees.
Brokerage Firms
Some brokerage firms can provide Medallion Signature Guarantees, especially if you hold an account with them. This service may be free of charge for account holders.
Additional Resources
- Transfer Agents: Entities that maintain records of security ownership may also offer these guarantees.
- Online Directories: Websites and financial directories can provide lists of institutions that are authorized to issue Medallion Signature Guarantees.
Comparisons to Related Terms
Notary Public: Unlike a Medallion Signature Guarantee, a notary public witnesses the signing of documents without certifying the authenticity of a securities transaction.
Signature Guarantee: A broader term that includes various types of guarantees beyond the Medallion Signature Guarantee, often used for non-securities transactions.
FAQs
Why is a Medallion Signature Guarantee necessary?
Can anyone obtain a Medallion Signature Guarantee?
Is there a fee for obtaining a Medallion Signature Guarantee?
Summary
A Medallion Signature Guarantee is a crucial element in the financial world that safeguards the authenticity and legitimacy of security transfers. By obtaining this certification from authorized financial institutions, individuals and businesses can ensure that their transactions are protected against fraud and unauthorized actions. Understanding where and how to obtain a Medallion Signature Guarantee, as well as its significance, is essential for anyone involved in security transactions.
References
- SEC Official Website: www.sec.gov
- Financial Industry Regulatory Authority (FINRA): www.finra.org
- Investor Protection Trust: www.investorprotection.org
