This may be the first time you have encountered the term Medallion Guarantee – and there’s no shame in that.
You wouldn’t expect to have heard of it really unless you spend your days transferring securities such as stocks and shares in the US and Canada. The reason being medallion guarantees are the way financial institutions improve identification procedures when dealing with North America.
What is a medallion guarantee?
In a nutshell, a medallion guarantee is simply a stamp with a barcode. This provides a guarantee to a company or individual that the document they require has been signed by the proper individual (usually a solicitor or some other legally approved person authorised to deal with the assets involved in the transfer of securities.).
It is necessary in such situations as when shares change ownership, there is a change of name, or the individual who own the shares has died.
Why come up with a medallion guarantee?
The medallion signature guarantee (or warranty) has actually been around for more than a century now. In the past of course, it wasn’t in its modern barcode form – that was introduced in the 1990s (February 24, 1992, to be precise).
The aims of the present-day scheme were to bring consistency to the process of transferring securities, as well as make it more efficient and less risky.
Three signature guarantee programmes existed at the time of the early 1990s scheme – the New York Stock Exchange Medallion Signature Programme, the Stock Exchanges Medallion Programme (SEMP) and the Securities Transfer Agents Medallion Programme (STAMP).
Pre-1992 medallion scheme
Before 1992 it was stamp which guaranteed that the person signing the papers was the correct individual or an agent who had legal authority to do so. In the event this wasn’t the case (ie the wrong person had signed) then it would be possible for the aggrieved party to recoup their financial losses. It was, in essence, designed as a failsafe guarantee for companies issuing North American securities, as well as US and Canadian transfer agents.
Post-1992 medallion scheme
Today’s medallion schemes were introduced to combat the increase in money laundering through terrorist and other activities. The barcoded stamps can only be produced by companies who have signed up to a medallion programme. It is impossible to replicate this stamp due to the fact a form of specialised ink is used. As a result, it is easy enough to tell when the barcoded stamp has been faked.
STAMP and SEMP are two such programmes still around today and more than 7000 guarantors have signed up to these two programmes in total. But there are far more official guarantors around. That’s because the drawback for UK, European and other countries in the past was that it was only US and Canadian companies such as Banks or Stock Brokers who were allowed to sign up to these programmes. This was finally extended to some guarantor banks and companies in the UK who can now carry out the necessary checks and confirmations.
UK shareholders and medallions
It makes sense for all UK shareholders to be aware of the medallion guarantee – even if they are not directly involved with a US and North American company. The reason for this is that often companies can merge, with the result that an existing UK shareholder can suddenly become the owner of American shares too. This means there is definitely a need for understanding the necessity of the medallion guarantee – and, in many cases, applying its use.
Then there is the fact that many individuals based here in the UK are employed by US and Canadian companies. The remuneration they are given as part of their employment package can take the form of ESPP shares. This is certainly the case with JP Morgan and IBM and in such cases, employees find themselves having to research and understand the medallion signature guarantee requirements.
Get in touch
Are you a member of the public, solicitor or a company (including a corporate entity) who requires a Medallion Signature Guarantee? If so then as a UK based Probate & Estate Administration company and transfer agent we are legally entitled to supply this. This is provided via the postal service. Do be aware that we are legally obliged to verify and check your details with the Money Laundering Databases.Find out more about ourselves by calling us, tel: 0203 985 9551 (or +44 20 8150 2010 from outside the UK). In the meantime, take a look at our website www.medallionguarantee.co.uk