A signature guarantee verifies the signature of a person making a request to transfer physical certificates of financial instruments such as securities like stocks. It is a form of authentication provided by financial institutions to prevent fraud.
The signature guarantee is different from a notary stamp. With a signature guarantee, the guarantor (the institution providing the guarantee) becomes responsible for the consequences of a fraudulent signature, protecting transfer agents and stock issuers against fraudulent transactions.
For a financial institution to be authorized to provide signature guarantees, it must apply and be accepted as a member of an official securities guarantee program. “Medallion” is one of those recognized securities guarantee programs.
There are three Medallion programs:
A signature guarantee is only needed for the transfer of physical securities certificates. If securities are held by a brokerage firm, they are held and transferred electronically and do not require a signature guarantee.
Reasons one might need a signature guarantee would be for the selling of securities, transfer of physical securities to beneficiaries upon the death of the current owner, changing the ownership name on an account, or to replace lost or damaged certificates.
While most investors today choose not to hold physical possession of their securities certificates, anyone who does and needs to transfer and/or replace them will require a signature guarantee.