Signature Guarantee

Signature Guarantee

A signature guarantee is a form of authentication, issued by a bank or other financial institution, which verifies the legitimacy of a signature and the signatory's overall request. The three Medallion signature guarantee programs include STAMP (the Securities Transfer Agents Medallion Program), SEMP (the Stock Exchange Medallion Program), and MSP (the New York Stock Exchange Medallion Signature Program). An investor can obtain a signature guarantee from a financial institution that is a member of one of these programs. With the number of crimes related to identity theft rising each year, using a signature guarantee service is a great way to prevent others from stealing your identity. A signature guarantee is required when an individual investor wants to sell or transfer securities held in physical certificate form. Using a signature guarantee service is a great way to prevent others from stealing your identity. The three Medallion programs include STAMP (the Securities Transfer Agents Medallion Program), SEMP (the Stock Exchange Medallion Program), and MSP (the New York Stock Exchange Medallion Signature Program). A signature guarantee is required when an individual investor wants to sell or transfer securities, such as stocks or bonds, held in physical certificate form.

A signature guarantee is required when an individual investor wants to sell or transfer securities held in physical certificate form.

What Is a Signature Guarantee?

A signature guarantee is a form of authentication, issued by a bank or other financial institution, which verifies the legitimacy of a signature and the signatory's overall request. This type of guarantee is often used in situations where financial instruments, such as securities, are being transferred.

In most cases, the guarantor, generally a bank or other financial institution, accepts all consequences in the event that the signature is fraudulent.

A signature guarantee is required when an individual investor wants to sell or transfer securities held in physical certificate form.
Using a signature guarantee service is a great way to prevent others from stealing your identity.
The three Medallion signature guarantee programs include STAMP (the Securities Transfer Agents Medallion Program), SEMP (the Stock Exchange Medallion Program), and MSP (the New York Stock Exchange Medallion Signature Program).
An investor can obtain a signature guarantee from a financial institution that is a member of one of these programs.

How a Signature Guarantee Works

With the number of crimes related to identity theft rising each year, using a signature guarantee service is a great way to prevent others from stealing your identity. A signature guarantee is required when an individual investor wants to sell or transfer securities, such as stocks or bonds, held in physical certificate form. If an owner holds securities through a broker, they will not need to obtain a signature guarantee to sell or transfer the securities.

An investor can obtain a signature guarantee from a financial institution. However, this institution must be a member of a recognized securities guarantee program, such as Medallion.

The three Medallion programs include STAMP (the Securities Transfer Agents Medallion Program), SEMP (the Stock Exchange Medallion Program), and MSP (the New York Stock Exchange Medallion Signature Program). STAMP participants include more than 7,000 U.S. and Canadian financial institutions; SEMP consists of regional stock exchange member firms and clearing and trust companies; NYSE member firms belong to MSP.

Membership with the Medallion program ensures that transfer agents will immediately accept certificates for processing.

Example of Using a Signature Guarantee

Imagine an investor, Alex, wants to sell their shares of ABC Company. Alex did not purchase these shares through a broker, and instead holds a share certificate, which is a written document that serves as legal proof of ownership of a set number of a company’s shares. Alex must sign this certificate in order to sell them, however, before the transfer agent accepts the certificates, the agent requires a signature guarantee to ensure Alex's identity and intention.

At this point, Alex must reach out to their financial institution in order to obtain a signature guarantee. While some banks may charge a small fee for this service, others, such as Bank of America, provide guarantees free of charge, as long as you have been a BofA client for at least six months.

Signature guarantees transfer the liabilities of losses to the transfer agent and away from the individual investor. One means of avoiding a signature guarantee is to have securities held in street name. This means that the securities are held in the name of a brokerage firm (instead of an individual’s name).

$56 Billion

The amount of money lost by consumers to identity fraud in the year 2020, according to a study by Javelin Strategy & Research.

Signature Guarantees and Other Forms of Identity Theft Protection

While increasingly widespread, identity theft can still be prevented. Regularly checking personal accounts and quickly correcting discrepancies can help mitigate the effects of a breach. Choosing multi-factor authentication when logging into sensitive apps is also helpful. Multi-factor authentication relies on something more than simply a password to access an account. For example, the Google Authenticator requests the use of a time-sensitive six-digit code. This is sent to a user’s phone. Using a password manager for online banking accounts can also add another layer of protection.

Related terms:

Broker and Example

A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. read more

Check

A check is a written, dated, and signed instrument that contains an unconditional order directing a bank to pay a definite sum of money to a payee. read more

Checking Account

A checking account is a deposit account held at a financial institution that allows deposits and withdrawals. Checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. read more

Deposit/Withdrawal At Custodian (DWAC)

Deposit/Withdrawal at Custodian (DWAC) is an automated system for deposits and withdrawals of securities at the Depository Trust Company (DTC).  read more

Financial Institution (FI)

A financial institution is a company that focuses on dealing with financial transactions, such as investments, loans, and deposits. read more

Financial Instrument

A financial instrument is a real or virtual document representing a legal agreement involving any kind of monetary value. read more

Guarantor

A guarantor is a person who guarantees to pay a borrower's debt if they default on a loan obligation. Read more about the role of a guarantor in finance. read more

Identity Theft

Identity theft occurs when your personal or financial information is used by someone else to commit fraud. read more

In Street Name

When a security is held in street name, a brokerage holds the security in their name for the legal benefit for another. read more

Medallion Signature Guarantee

A medallion signature guarantee is a special certification stamp that guarantees a signature that authorizes an authentic transfer of securities. read more