The transfer of assets from one brokerage to another can be very hectic and that too if you hold your securities in physical form with hopes to transfer them or sell them off. In order to do so, you have to sign these certificates (securities’ power). The signature, however, cannot be a crude one; you will have to get this signature “guaranteed” before a transfer agent can process your transaction. Although doing this can be an overhead and a hassle, it is crucial to do so since the process provides you security by making it complex for people to steal your capital through the forging of your signature on these securities’ certificates and/or such documents. When you go in for the transfer of assets, the transfer agents always assert over signature guarantees, which demonstrates the importance of it. The reason for the agent doing so lies in the fact that this is an attempt by the agent to limit the liability of the brokerage in the events of that the signature turns out to be counterfeited.
A Medallion Signature Guarantee is among the many special certification stamps which deems the signature on the transfer of assets authentic. Physically, it is special stamp-and-signature blend that some financial institutions can grant as verification of identity for the transfer of assets. A MSG is a binding guarantee, that is issued by an authorized guarantor organization, that:
a) the signature on the securities power certificate was an original,
b) the person signing was an agent affiliated with the guarantor organization, and
c) the signer had the legal ability to endorse it.
As an investor, a signature guarantee can be from any financial organization that have the participation in any one of the three Medallion Signature Guarantee programs, such as a commercial or savings bank. The three Medallion signature guarantee programs are the:
o Securities Transfer Agents Medallion Program (STAMP)
o Stock Exchanges Medallion Program (SEMP)
o New York Stock Exchange Medallion Signature Program (MSP)
As a party, the need for a medallion signature guarantee arises in the event of the owner needing to sell or move securities, held in the physical format. A way to avoid the hassle of getting your signature guaranteed is to hold your assets in the name of your brokerage institution instead of your own name. In such a case, i.e. if the owner holds the assets through a broker, the party will not have to attain a signature guarantee in order to sell off or transfer securities.
It is very evident, if not in the possession of a Medallion Signature Guarantee, there can be severe downsides and problems. In the case of a financial institution, if the organization is not the member of one of the three Medallion Signature Guarantee programs, they will be unable to provide clients with signature guarantees, hence losing business. As a customer, if you are not involved as a client with an institution participating in one of the recognized Medallion Signature Guarantee programs, it is extremely probable that they would not guarantee your signature, hence making it nearly impossible for you to transfer or sell your assets. Transfer agents do not need any more reasons to reject the transaction with a signature guarantee from a firm that is not participating in one of the recognized Medallion Signature Guarantee Programs. Therefore, the top source of getting your assets a Medallion Signature Guarantee will be the firm you do business with, if they are participating. This firm could very well be a bank, savings and loan association, brokerage firm or credit union.
The Medallion Signature Guarantee on your securities certificate is fairly easy to procure. Banks, credit unions, broker dealers, and other financial firms that are participating in one of the Medallion Signature Guarantee programs can provide you with one. All that is to be done is that the bank management stamps it on your transfer form near your sign and marks it with his/her own signature. You have to be, however, be an account holder for a specific time (usually 3-4 months) with the firm you are trying to get the guarantee from. Since there is just too much risk involved, they would not be granting you one if you are not a client, no matter how thorough your documentation is. If the firm you are participating with is not participating, then as a last resort, you will have to get into business with one of the participating firms and wait for the maturity time before you can get a Medallion Signature Guarantee on your securities certificate.
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