Medallion Signature Guarantees are used to authenticate the signature and capacity of a person requesting the redemption or transfer of securities. Its use protects the issuer of the security; the owner(s) of the security; and the transfer agent of a security because a guarantee limits these parties’ liability and losses if a signature is a forgery. By affixing the medallion signature guarantee stamp, the guarantor warrants that at the time of the signing:
The Securities Transfer Agents Medallion Program® (STAMP), The Stock Exchanges Medallion Program,® (SEMP) and The New York Stock Exchange Inc. Medallion Signature Program℠ (MSP) are the leading signature guarantee programs recognized by all major financial services associations throughout the United States and Canada, These programs are also endorsed by the Securities Transfer Association (STA).
Medallion Coverage Limits
It is important to understand that there are several different coverage limits based on the prefix of the stamp itself. Each prefix is shown below with its corresponding coverage per transaction.
| Alpha Prefix | Surety Amount |
|---|---|
| Z | $10,000,000 |
| Y | $5,000,000 |
| X | $2,000,000 |
| A | $1,000,000 |
| B | $750,000 |
| C | $500,000 |
| D | $250,000 |
| E | $100,000 |
| F (Credit Unions) | $100,000 (per transaction) |
A stock or bond power is a legal document – separate from a securities (stock or bond) certificate – that investors can use to transfer or assign ownership to another person or entity. Physically, a stock or bond power looks like the back side of a stock or bond certificate, and it can be completed in the same manner. Typically, a stock or bond power is presented in conjunction with its related unsigned certificate or book entry statement representing the electronically custodied securities.
Shareholders and Broker-Dealers may benefit from using the Deposit/Withdrawal at Custodian (DWAC) transfer administered by the Depository Trust Company (DTC). Deposit/Withdrawal at Custodian (DWAC) is a method of electronically transferring shares to and from DTC using a Fast Automated Securities Transfer (FAST) service transfer agent as the facilitator. DWAC is one of two ways of transferring securities between transfer agents and broker/dealers. For eligible securities and transactions, shareholders can request their broker to initiate an electronic deposit using a DWAC transfer rather than dealing with a physical stock certificate deposit.
Broker-Dealers must have authority granted to them when requesting a security transfer into a registration under their control. This is more obvious when dealing with a physical certificate but holds true for book-entry shares as well. The authority is often presented in the form of a Medallioned Stock Power.
a) A person who guarantees a signature of an indorser of a security certificatewarrants that at the time of signing:
(b) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing:
(c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (b) and also warrants that at the time the instruction is presented to the issuer:
(d) A guarantor under subsections (a) and (b) or a special guarantor under subsection (c) does not otherwise warrant the rightfulness of the transfer.
(e) A person who guarantees an indorsement of a security certificate makes the warranties of a signature guarantor under subsection (a) and also warrants the rightfulness of the transfer in all respects.
(f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (c) and also warrants the rightfulness of the transfer in all respects.
(g) An issuer may not require a special guaranty of signature, a guaranty of indorsement, or a guaranty of instruction as a condition to registration of transfer.
(h) The warranties under this section are made to a person taking or dealing with the security in reliance on the guaranty, and the guarantor is liable to the person for loss resulting from their breach. An indorser or originator of an instruction whose signature, indorsement, or instruction has been guaranteed is liable to a guarantor for any loss suffered by the guarantor as a result of breach of the warranties of the guarantor.
