A signature guarantee is required for the transfer of physical securities certificates. The signature guarantee comes in the form of an authorized signature from a financial institution and medallion stamp and proves to the transfer agent—the person who oversees the ransfer of the securities—that:
Today, most people hold their securities in “street name” which means they’re held electronically by a brokerage firm. Buying, selling or transferring securities in this form does not require a signature guarantee. However, physical securities still exist and anyone who owns or inherits them will need a signature guarantee.
Reasons why you might need a signature guarantee include:
A medallion stamp is a special stamp used by financial institutions who belong to one of three Medallion Signature Guarantee programs. It’s used to ensure the validity of the signature of the institutions representative. The stamp contains a barcode and special invisible chemical in the ink that can be read by scanners owned by transfer agents. It is an advanced security measure to prevent fraud.
The “Medallion” Signature Guarantee promises that transfer agents will immediately accept and process the securities transfer request.
There’s often confusion about whether notaries or notarization is the same as a signature guarantee. They are not. While both validate the identity of the person signing the documents, the notary does not guarantee the assets. A financial institution does guarantee the signature of the owner and take financial responsibility for the assets in case of fraud. As such, a notary cannot provide a medallion stamp or signature guarantee.