Protecting shareholders or their estate representatives from liability & fraud
Stamp of Assurance: The Story of Medallion Signature Guarantees
Signature guarantees date back to the 19th century and have evolved over the decades to the system now used today. To mark our milestone on this journey, we take a look at the history of medallion guarantees and how they protect shareholders or their estate representatives from liability and fraud.
Medallion signature guarantees are unique to the transfer of securities in the US and Canada. If you are administering an estate with shares listed in North America, the chances are you will need a medallion guarantee before the shares can be transferred to the beneficiaries.
Tens of thousands of UK investors bought shares in high profile companies such as Cadbury Schweppes, Tyco and IBM, all of which are now listed in the US.
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It used to be the case that share transfer documents had to be stamped with a medallion guarantee in the US or Canada. However, Title Research can now issue the medallion guarantee quickly and easily in the UK, after we lobbied for and secured approval to join the US Securities Transfer Agents Medallion Programme (STAMP). So for the first time, personal representatives can take advantage of a UK-based service, allowing them to obtain the medallion guarantee in a matter of days, rather than weeks.
The first signature guarantees date back to the 19th century, and the current system has evolved over the last 25 years into a highly effective way of protecting against fraud. Each medallion guarantee stamp has a unique barcode, if a stamp goes missing; the missing code is registered to ensure it cannot be used fraudulently.
Stamps combine overt and covert security features to combat counterfeiting, such as invisible ink obtained by us from the STAMP programme administrator in the US. Only special machine readers held by share registrars can detect this ink. This may all sound a bit “007” and if your clients are wondering why on earth they need to have their documents stamped with invisible ink from America, the answer lies in an Act of Congress signed into law by President Bush in 1990, to deal with the growing incidents of stock fraud in the 1980s. The Penny Stock Reform Act 1990 amended the Securities and Exchange Act 1934, and granted the Securities & Exchange Commission (SEC) the authority to establish more robust standards for share transfers.
Acting on this authority, the SEC enacted Rule 17AD-15 in 1992, which enables share registrars to reject a request for transfer if the medallion guarantor is not a member of an approved medallion signature guarantee programme. One such programme is STAMP run by the Securities Transfer Association. The programme now has over 7000 financial institutions in the US and Canada, mostly banks.
For decades prior to the SEC rule, it was the issuer of the shares and the share registrar who were liable for improper share transfers. The SEC rule effectively shifted liability to the guarantor issuing the medallion signature guarantee, usually the banks.
In a milestone for the development of medallion guarantees, Title Research is pleased to join over 7000 financial institutions in the US and Canada as members of STAMP. Like all members, we’ve been vetted to ensure good financial standing and undertaken the required training on how to securely issue and safeguard medallion signature guarantees. So now there’s no need to go Stateside to get your medallion guarantee – we’ve got you covered right here.
To obtain a medallion signature guarantee or to enquire about our range of share transfer and asset repatriation services, call us on 0345 87 27 600
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