DEFINITION of 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, she will not need to obtain a signature guarantee to sell or transfer the securities.
BREAKING DOWN Medallion Signature Guarantee
In order 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, the Stock Exchanges Medallion Program and the New York Stock Exchange Medallion Signature Program. Normally, you can obtain a Medallion signature guarantee at a financial institution where you are already a customer. The bank may assess a small charge for this service.
Medallion Signature Guarantees and Share Certificates
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:
Company name and registration number
Shareholder name and address
Number of shares owned
Issue date of shares
Amount paid (or treated as paid) on the shares
Shares may be issued in separate classes (see bullet point 5). For example, Berkshire Hathaway offers stockholders “Class A” (BRK.A) and “Class B” (BRK.B) options. Each class confers different rights to the stock holder with regards to dividends and voting options. At times the owner of a stock certificate can give a proxy to another person to allow them to vote with said shares on matters of company policy.
If a share certificate that 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 record instead.