What it means
When you ask a transfer agent or investment firm to move shares, change ownership or sell a large holding by paper form, the recipient needs to be sure that you are really the owner. An ordinary signature cannot prove this.
The medallion signature guarantee adds the backing of an institution that has agreed to stand behind it. The stamp is applied by a firm that belongs to an approved industry programme, such as one of the signature medallion programmes run for the securities industry.
The institution checks the signer's identity and that the person appears to have the authority to sign. If the signature turns out to be forged, the institution that gave the guarantee can be held liable up to the limit printed on the stamp.
Because of that liability, institutions are careful about whom they guarantee. They will normally do it for their own customers, so you generally need to go to the bank, credit union or broker where you hold an account.
Some firms charge a fee, and others provide it free to account holders. A medallion guarantee is not the same as a notarisation.
A notary only confirms identity and witnesses a signature, and takes no financial responsibility for the transaction. A medallion guarantee carries a financial promise, which is why transfer agents insist on it for high-value or unusual requests.
Typical uses include moving certificated shares into someone else's name, transferring securities after a death, or releasing a large sum from a managed account to a third party. With the rise of electronic transfers, fewer requests need the stamp, but it remains common for physical share certificates and certain paper forms.
Timing and preparation are worth planning for. Call the institution first to confirm that it offers the service, what identification it needs, and whether it will apply the stamp for non-customers, because policies vary.
Take the unsigned document with you, since the signature must usually be made in front of the person applying the stamp.
In practice
Real-world examples.
Example
An executor is closing the investment account of a deceased relative and transferring shares to the heirs. The transfer agent requires a medallion signature guarantee on the form. The executor visits the bank where she holds an account and gets the stamp. The transfer then goes through without further queries.
Example
A retired engineer holds old paper share certificates worth $75,000 and wants to sell them through a broker. The broker's paperwork requires a guarantee because the certificates are in his own name. He obtains it at his credit union before sending them in. The sale completes a week later.
Example
A founder wants to transfer her stock in a small company to a family trust. The company's transfer agent asks for a medallion stamp on the transfer form to protect itself against fraud. She asks her lawyer which institution can supply it. Her own bank turns out to offer the service free to account holders.
Case study
Seen in the real world.
Pinegate Transfer Services is an illustrative, fictional share registrar that manages the records of several small listed companies. A fraudster once submitted a transfer form with a forged signature to move $40,000 of shares from an elderly investor's account.
The form had no medallion stamp, and under the registrar's rules a request of that size required one. The staff rejected the form and contacted the investor, who confirmed she had made no such request.
The investor later thanked the registrar for acting on the missing stamp, which she regarded as a sign of careful handling. Had the registrar accepted an unstamped form, it would have borne the loss. The illustrative lesson is that the stamp shifts the financial risk of a forgery to the institution that gave the guarantee, and so it makes the check worthwhile.
Watch out
Common mistakes.
- Confusing a medallion signature guarantee with a notary stamp, when the two give very different levels of protection.
- Signing the form before you reach the institution, when many require the signature to be made in front of them.
- Using an institution that is not in the approved programme, which means the transfer agent will reject the stamp.
Questions
People also ask.
Where can I get one?
Usually from a bank, credit union or brokerage where you have an existing relationship, though not every branch offers the service.
Is there a limit on the amount it covers?
Yes, each stamp carries a maximum value, so a transaction above the printed limit may need a stamp with a higher limit.
Do I need one for an online transfer?
Usually not, because electronic transfers use other identity checks, though paper forms for large or unusual requests often still require it.
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