So, you have plenty of securities in your possession.Well, that’s great. But there must be a time when you would have wanted to sell the securities or maybe transfer them to another beneficiary?
Relatable, right?
To burst your bubbles, transferring physical security isn’t as easy as it seems. Due to an impending threat of fraud, there has been an increase in verification checks. As a result, you also need one to transfer your securities.
But how’s it possible?
Don’t fret; we have the answer for you… and it’s none other than a Medallion Signature Guarantee Signature (MSG).
Wondering what it is or how it works? Let’s find out!
What Is a Medallion SignatureGuarantee (MSG)?
Medallion signature guarantee is a statutory requirement by the American Security and Exchange Commission (SEC) in North America to validate and verify the share securities before a transfer.
So, if you hold a physical certificate form of debt or share securities, you will need to sign a legal document (federal transfer certificate) known as a certificate and securities power to authenticate the transfer of securities. Furthermore, a signature is required on all the documents before a transfer agent agrees on the transaction.
Importance of an MSG
Now, you would have a basic know-how of an MSG, but why is it even relevant, and how is it done? Well, you need it in one of the three following cases:
- Moving securities to a new account
- Transferring securities as a gift (to a donation)
- The owner of the securities has passed away
You see, a Medallion signature guarantee stamp prevents the issue of forging signatures, which may, otherwise, lead to scams and thefts. The MSG features a special security ink, and it’s placed on the Transfer request form, which verifies the validity and authority of specific security and proves to the transfer agent that the signature is genuine.
The special feature makes it harder for a third party to forge your signature and engage in a scam. With an MSG stamp, the following three parties come under protection:
- Security holder (you): Now, it’s not possible for someone else to access your shares and cash them out,
- Transfer agent: The agent is saved from liability under a guarantee,
- The purchaser: The buyer will get legitimate secured shares.
Where to Get an MSG?
MSG for securities transfer is a mandatory requirement. That’s no doubt about it. But where can one get such stamps? Fortunately, you can get it from any financial institution, broker-dealer, credit union, or savings bank that is part of a Medallion signature guarantee program.
Here are the three common Medallion signature guarantee programs from where you can obtain a Medallion signature.
- Securities Transfer Agent Medallion Program (STAMP): Almost 7000 Canadian and U.S. financial institutions participate in STAMP.
- Stock Exchanges Medallion Program (SEMP): regional stock exchange member firms, clearing, and trust companies participate in SEMP.
- New York Stock Exchange Medallion Signature Program (MSP): Only NYSE member firms are part of MSP.
So if you have an account with any financial institution that’s part of any of the above-mentioned programs, you can easily get an MSG. Moreover, once a financial institution gets you an MSG, it assumes the liability in case of any theft due to forged signatures.
Usually, financial institutions only provide medallion signature guarantees to those individuals who use their services for zero or minimal documentation fees (probably ranging from $10 – $50). In most cases, banks require verification I.D. such as a driver’s licence or state I.D. to approve your MSG request.
Once you get the medallion signature, you have the authority to transfer the securities.
Prefixes and Guarantee Levels
Each Medallion Guarantee stamp is secured by a limit through an alpha coded prefix/stamp. If the transaction value of securities goes above and beyond the guarantee levels, an MSG will be rejected. Financial institutions are only liable for coverage up to the guarantee limit.
Here’s an example. Suppose you want to conduct a transaction worth $200,000; you’ll have a Medallion guarantee with the prefix D, allowing transactions up to $250,000. If it goes above that, the MSG will be rejected. Let’s say you want to conduct a securities transaction for up to $400,000; you’ll need a guarantee prefix C, which allows transactions up to $500,000.
For your ease, here we have listed some guarantee levels:
- D= $250,000
- E= $100,000
- Y= $5000000
- A= $1000000
- B= $750,000
- C= $500,000
It should be noted that most banks and credit unions provide a guaranteed level of $100,000 denoted by the prefix E.
Medallion Signature Guarantee vs. Medallion Signature Guarantee Stamps
Most people get confused with both terms. For your ease, both terms are the same. MSG can be referred to by many names, but they serve the same purpose, i.e., to authenticate the transfer or sale of securities, to allow change of ownership name on the security, or to replace lost and damaged securities.
Medallion Signature Guarantee vs. Notary Public Stamp
Things start to get a little confusing here. For starters, both these terms aren’t the same and have notable differences. In fact, a notary has a completely different purpose as compared to MSG. Let’s briefly look over the main differences between the two.
Initially, both MSG and notary stamps are used to verify documents. But what type of documents? Well, the difference between these two arises here. MSG is usually for the transfer of securities, including shares, bonds, and options.
On the other hand, notary public signature stamps are for financial, business, and legal documents. In a much clear sense, here are some types of documents where a notary stamp is required:
- Mortgage forms
- Property deeds
- Wills and trusts
- Custody agreement
- Power of attorney
- Construction agreements
- Employment contracts
Usually, it costs around $2 – $20 for notary stamps, but it can go up to 79.26 GBP in case of mortgage closing costs. Moreover, you can get a notary public stamp from state-appointed public figures, including banks, law firms, real estate offices, accountants, libraries, etc. On the other hand, only licensed financial institutions can grant an MSG.
Medallion Signatures Guarantee (MSG) are something you can never overlook while transferring securities. Never! In fact, without an MSG, your transfer agent wouldn’t even accept your share certificates. Nonetheless, the main purpose of an MSG is to protect you from fraud and theft.
So, if you’re considering transferring/selling shares, make it a point to first contact your bank and get a Medallion Signature Guarantee.