What Is a Medallion Signature Guarantee?

A medallion signature guarantee is one of several special certification stamps that guarantees a signature that authorizes a transfer of securities is authentic. Parties will generally require a medallion signature guarantee when an owner 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.

How Medallion Signature Guarantees Work

To provide a Medallion signature guarantee, an institution must be a member of one of three Medallion signature guarantee programs: the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP), and the New York Stock Exchange Medallion Signature Program (MSP). 

Normally, you can obtain a Medallion signature guarantee at a financial institution where you are a customer. The bank may assess a small charge for this service; fees can range from $0 for customers with solid, established relationships to up to a $100 for $200,000 in assets.

For financial institutions with on-site stamps, the stamp guarantee can be provided on the same day provided there are no outstanding requirements or errors. Otherwise, it could take between two and five business days for a review.

Because the guaranteeing institution's assets back the certification, a guarantee stamp is not easy to obtain. Banks, credit unions, and other financial institutions that offer Medallion Signature Guarantee are:

• Chase
• Citi
• Capital One
• Merrill Lynch (Bank of America)
• Navy Federal Credit Union
• Northeast Credit Union

Common Reasons for Needing a Medallion Signature Guarantee

Medallion signature guarantees can be used for many purposes, but the most common reasons are when:

1. Securities are gifted
2. Securities are moved from one account to another
3. The owner of the security passes away
   

Medallion Signature Guarantee and Share Certificate

A medallion signature guarantee often corresponds with a share certificate. A share certificate (or stock certificate) is a written document that serves as legal proof of ownership of a set number of a company’s shares.

This is in contrast with owning a bond, a form of debt instrument, in which a separate party loans money to a company or the government. Key information on a share certificate generally includes the following:

• Certificate number
• Company name and registration number
• Shareholder name and address
• Number of shares owned
• Class of shares
• Issue date of shares
• Amount paid (or treated as paid) on the shares

Shares may be issued in separate classes. For example, Berkshire Hathaway offers stockholders Class A (BRK.A) and Class B (BRK.B) shares. A number of other well-known companies have dual-class structures, such as Ford (F) and Meta (META), formerly Facebook. Meanwhile, some companies have multiple share classes; for example, Google's parent company, Alphabet (GOOG) and (GOOGL), has three classes of shares.

Each class offers different rights to the stockholder with regard to dividends and voting options. Sometimes, the owner of a stock certificate can give a proxy to another person to vote on matters of company policy.

If a share certificate is damaged, lost, or stolen, the company may issue a replacement certificate. In such a case, the shareholder must return the damaged document. Share certificates may either be registered or in bearer form. A bearer share certificate entitles the holder to exercise all legal rights associated with the stock.

Today individual investors rarely have physical possession of their share certificates, preferring electronic records instead.

The Bottom Line

The Medallion signature guarantee validates the identity and signature of a party transferring securities or investments. Banks, credit unions, and other financial institutions must belong to one of three select Medallion signature guarantee programs to provide this service. Because of increased financial risks, financial institutions tend to react conservatively when issuing them. Most often, Medallion signature guarantee stamps are needed for the gifting of securities, to transfer assets upon the death of the original owner, and when the security or investment holder moves the assets from an account.