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Medallion Signature Guarantee
Medallion Signature Guarantee is a secured authorization stating that the transfer of any securities, be it bonds or stocks, are legal and authentic in nature.
SEBI- Securities and Exchange Board of India, the watch dog or regulator oversees all the activities in the securities market, thereby protecting the investor from all sorts of frauds. While all that’s good, but what about selling or transferring of securities to another shareholder in physical form? Thanks to Medallion Signature Guarantee, it came to rescue to protect the interest of the shareholders, offering the desired legitimacy. So, what exactly is this concept about?
Define Medallion Signature Guarantee
A medallion signature guarantee is a validation certifying the legitimacy of the transfer of financial securities in physical form to another person. Financial institutions and transfer agents often require it to defend against fraud and confirm the authenticity of the transactions.
To obtain a medallion signature guarantee the respective financial institution should be participating in a medallion signature guarantee program. However, it’s not easy to get this stamp from any financial entity because of the stringent verification process.
Banks, credit unions, and other financial houses issue this authorization stamp. It certifies that the transaction can proceed more confidently.
How does the Medallion Signature Guarantee Works?
A medallion signature guarantee is a method that confirms the legitimacy of a signature on crucial financial papers, particularly those relating to the transfer or sale of stocks. You must have an account with a financial institution authorized to provide this service to acquire a medallion signature guarantee.
The document must be presented in person, with government-issued photo identification and proof of ownership or entitlement to the transferred securities. After that, the financial institution will confirm that you are permitted to sign the document and that your signature matches the one on file.
If everything checks out, the institution will add a medallion signature guarantee stamp or medallion to the document, allowing the transaction to proceed with more security and confidence.
Reasons for Requiring a Medallion Signature Guarantee
A medallion signature guarantee is an essential tool for verifying the legitimacy of a signature on financial papers used in the transfer or sale of securities. Some of the most prevalent reasons for requiring a medallion signature guarantee are as follows −
Transferring stock, bonds, or other securities ownership
Selling securities and preventing fraud
Transferring securities to beneficiaries and estate planning
Changing the owner of an investment account
Updating mutual fund and other investment vehicle account information
Who offers Medallion Signature Guarantee?
Financial institutions such as banks, credit unions, and brokerage firms provide medallion signature guarantees. This service, however, is not offered by all financial institutions. These are various methods for obtaining a medallion signature guarantee −
Medallion signature guarantees authentication for transfer of securities
Banks and Credit Unions − Medallion signature guarantees are available to account holders at several banks and credit unions. Nevertheless, not all banks and credit unions offer this service, so check with your financial institution before assuming they do.
Brokerage Firms − Most brokerage houses offer medallion signature guarantees to their clients. If you have a brokerage account, you can enquire about obtaining a medallion signature guarantee through them.
Transfer Agent − A transfer agent is a corporation that keeps track of stock and bond ownership. Some transfer agents offer medallion signature guarantees to shareholders of the firms they represent.
Third-Party Providers − Several third-party suppliers focus on providing medallion signature guarantees to people and corporations. Often, these service providers demand payment for their work. Still, they can be a convenient choice if your financial institution does not provide the service or if you require a medallion signature guarantee after hours.
Difference Between Medallion Signature Guarantee And Notary
Notary and medallion signature guarantees are two methods of legal verification that are frequently used to authenticate signatures.
Medallion signature guarantee Vs Notary
While they may appear the same, they serve diverse functions and have significant distinctions. The following are the primary distinctions between a medallion signature guarantee and a notary −
|Parameters||Medallion Signature Guarantee||Notary|
|Purpose||To transfer financial instruments like stocks or bonds||To authenticate various legal documents and transactions|
|Scope of Authority||Limited to financial transactions||General purpose, including legal documents, oaths, and affidavits|
|Issuing Institutions||A few financial organizations, including banks and credit unions||Licensed notaries|
|Liability||Limited, only covers the transfer of securities||More extensive, includes the accuracy of the notarised document and the identity of the signee|
|Identification Required||Multiple forms of identification are required, including a photo ID||Typically requires one form of government-issued ID|
|Cost||Multiple forms of identification are required, including a photo ID||Generally less expensive than a Medallion Signature Guarantee|
Examples Of Medallion Signature Guarantee
Example 1: Transferring securities
A medallion signing guarantee is commonly required when transferring securities, such as stocks or bonds, between brokerage firms. It usually entails filling out a transfer form and having the account holder sign it. To establish the transfer's legitimacy and defend against fraud, the receiving brokerage business may request a medallion signing assurance from a recognized financial institution.
Example 2: Estate transfer
A medallion signing guarantee may also be required when transferring assets as part of an estate transfer. When someone dies, and their assets must be passed to their heirs or beneficiaries, a medallion signature guarantee on specific legal papers, such as stock certificates or transfer agent forms, may be necessary. It is done to avoid fraud and guarantee that assets are distributed to the proper beneficiaries.
A medallion signature guarantee is essential for preventing fraud and verifying the legality of specific financial transactions. While it may appear inconvenient, it ultimately protects all parties involved. Knowing when and why a medallion signing assurance is required and where to get one is critical. You may assist in ensuring the safety and security of your financial transactions by following the right processes and collaborating with skilled professionals.
Q1. Can I obtain a Medallion Signature Guarantee for my pet's paw print?
Ans. No, a medallion signature guarantee is only available for signatures by a living human with valid ID proof.
Q2. Can my local bank provide me with a Medallion Signature Guarantee?
Ans. Medallion Signature Guarantees are not available at all banks. This service is only available to institutions who are member of the approved medallion signature guarantee schemes.
Q3. Can I obtain a Medallion Signature Guarantee for a previously signed document?
Ans. No, to get a medallion signature guarantee, the signature must be witnessed by a Medallion Stamp Program participant at the time of signing.
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