When you wish to sell your shares, you must prove to the transfer agent that you have the right to do so and that the transaction is legal. Transfer agents try to limit the possibility of fraudulent transactions by requiring a medallion signature guarantee on the stock transfer forms. The process of obtaining one is more complex than having a document notarized, and only specially licensed institutions can perform this service. You must submit several documents to initiate the process.
Medallion Signature Guarantee
A medallion signature guarantee certifies that the signature on a document is genuine and that the signer is legally authorized to make the transaction. Verifying a signature makes the guarantor liable if the signature is a forgery and the transaction is unauthorized. The guarantor must be a member of the Securities Transfer Agents Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange Medallion Signature Program.
Members of the medallion signature programs include commercial banks, credit unions and brokers. It’s best to obtain a medallion signature guarantee from your bank. Many financial institutions provide this service to their account holders. It is usually complimentary. A guarantors may guarantee a transaction up to a specific amount, which varies by institution. For example, some providers may guarantee up to $500,000 while some may guarantee no more than $50,000.
The documents typically required for a signature guarantee include two forms of identification, one of which must be a photo ID; proof of ownership of the shares you’re selling, such as a recent account statement from your broker; and a document showing the current value of the shares. If you are acting on the behalf of the owner of the shares, you must present a proof -- such as documentation of power of attorney -- of your legal right to do so. If the shares are from a jointly held account, the other account holder must also produce identification and proof of ownership.
Signature Verification Process
When you request a medallion signature stamp, you must provide your shares transfer form and the supporting documents to a qualified officer at the financial institution. The officer will examine the documents and verify your signature to ensure they are genuine, then authenticate your signature with a medallion signature stamp. At this point, you may submit your documents to your broker to complete the sale.
Tina Amo has been writing business-related content since 2006. Her articles appear on various well-known websites. Amo holds a Bachelor of Science in business administration with a concentration in information systems.