In the United States, a medallion signature guarantee is a special signature guarantee used primarily when a client transfers or sells US securities. It is an assurance by the financial institution granting the guarantee that the signature on the transaction is genuine and that the guarantor accepts liability for any forgery.

Guarantee

A medallion signature guarantee protects shareholders by preventing unauthorized transfers and possible investor losses. A medallion signature guarantee also limits the liability of the transfer agent who accepts the certificates.

A medallion signature guarantee is a binding warranty, issued by an agent of the authorized guarantor institution, that: (a) the signature was genuine; (b) the signer was an appropriate person to endorse, and (c) the signer had legal capacity to sign. A medallion signature guarantee is not equivalent to a US notarial Acknowledgment.

In recent years, some companies in the UK have been approved to sign up to become guarantors, such as heir hunting companies, and law firms, like Lester Aldridge LLP.

History

The medallion signature guarantee program has existed since February 24, 1992, when Securities and Exchange Commission's Rule 17 Ad-15 went into effect. The medallion signature guarantee program was implemented in order to protect investors, treat financial institutions equitably, increase the efficiency of transferring securities, and reduce risk.

Until then, financial institutions had cumbersome and inconsistent policies regarding certificates presented to a transfer agent to change ownership.

References

  • Piombino, Alfred E. (2011). Notary Public Handbook: Principles, Practices & Cases. National Edition. East Coast Publishing.
  • "Signature Guarantees: Preventing the Unauthorized Transfer of Securities". United States Securities and Exchange Commission. Retrieved November 15, 2013.
  • The Medallion Signature Guarantee website includes a directory of firms offering medallion signature guarantees.
  • The Investor.gov website includes information about Medallion Signature Guarantee Programs.