What is a Transfer Agent and why did they just ask me for a medallion?

A stock transfer agent is a company, hired by the issuer, to manage the change in ownership on shares and maintains a register of ownership. This includes cancelling the name and certificate of the shareholder who sold the shares of stock, and substituting the new owner's name on the official master shareholder listing.

To provide some more details, the transfer agent has three major roles:

1. To issue certificates to show changes in ownership of securities. When an individual or entity buys a stock or bond, a certificate must be issued to record the change of ownership. If a corporation does a stock split or dividend, the transfer agent is responsible for the issuing and recording of the new shares. Most of the time, ownership is recorded through book-entry securities, electronically recorded ownership certificates.
2. To act on a corporation’s behalf in communicating with stock and/or bond holders. The transfer agent often pays out the dividends, interest or other distributions for a corporation. It may also mail quarterly and annual reports, serve as a tender agent during a tender offer, exchange stocks and bonds during a merger and send out proxy materials as required.
3. To provide service to shareholders whose stock or bond certificates have been lost, stolen or destroyed. Some individuals and legal entities choose to hold physical stock certificates, rather than have them held in book-entry form. As is the case with any physical item, it can be lost, stolen or destroyed. In a case such as this, the transfer agent would help the investor replace the certificate.

The transfer agent requires a shareholder to obtain a medallion signature guarantee to prevent fraud. By doing so, the transfer agent reduces its potential liability.

It is important to note that the medallion signature guarantee should not be confused with a notary public. The big difference is in the liability. The organization that guarantees the authenticity of the signature is liable for the financial value of the transaction.