A medallion guarantee, also referred to as a medallion signature guarantee, is used when buying or selling physical stock and bond certificates. A medallion guarantee is used to prove that the stock or bond owner has the right to sign over his/her rights to the assets being sold. A medallion guarantee may also be used to change ownership of an investment account such as when transferring stocks or government bonds into a trust.
The medallion signature protects the following:
- An existing shareholder’s interest in the physical security instrument by reducing the likelihood of the asset being stolen;
- The transfer agent’s liability because a medallion is used to guarantee the signature of the owner; and
- The purchaser of shares because it provides a guarantee that the purchase is legitimate.
In short, the medallion guarantee is the issuing financial institution’s certification that a signature regarding the sale or transfer of a security instrument is authentic. Sometimes this may be required when transferring securities into a living trust.
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A medallion guarantee is commonly confused with functions performed by a notary. The medallion signature guarantee is different than a notarized signature. A notary public receives a license from the state to perform his/her duties. A financial institution can appoint a notary to perform medallion guarantees on its behalf. A notary can issue a medallion guarantee if he/she is a certified participant in a financial institution’s medallion signature. A financial institution may charge a small fee for issuing a medallion guarantee.
How to Get a Medallion Guarantee
You can get a medallion signature guarantee from a local bank or brokerage firm (most financial institutions restrict the medallion guarantee to existing customers). Medallion guarantees can only be authorized by one of three medallion signature guarantee programs:
- Securities Transfer Agents Medallion Program
- Stock Exchange Medallion Program
- New York Stock Exchange Medallion Signature Program
A financial institution must belong to one of the above three groups to issue a medallion signature guarantee. If the financial institution is not a member of a medallion guarantee program, it is unauthorized to provide a signature guarantee. Institutions that participate in the program guarantee customer signatures with the assurance that their guarantee will be immediately accepted for processing.
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