Jennifer’s company has had recent layoffs. She is a computer engineer with over three decades of experience. Jennifer recently found a new position and would like to transfer her 401 (K) after switching jobs. She would also like to transfer some of her paper stock ownership in her previous company to her children and donate some to her favorite charity.  

Jennifer makes an appointment at her bank to transfer these securities. After learning about her needs, Jennifer’s bank provides a list of documents she must bring. She is required to have a medallion signature guarantee to make the transfers. Jennifer’s bank provides these services free of charge to clients who have been with them for at least six months. 

What is a medallion signature guarantee?

A medallion signature guarantee (MSG) is a certification that is used to protect from fraudulent transfers. Unlike a notarization, a medallion signature guarantee focuses on the bank instead of the individual. When a bank provides a MSG, it takes responsibility for reimbursing the victim if your signature is not genuine; you are not who you claim to be, or you do not have the capacity or legal authority to make the transfer. 

A MSG combines a bank officer’s signature with a unique stamp and barcode and an invisible ink compound to increase security further. 

Why is a MSG required?

Jennifer is required to have a MSG to transfer her stock to her children or for donating them to a nonprofit since the stock is in paper form. Stocks and bonds which are held in a digital form rarely require a MSG. Jennifer also needs a MSG to transfer her 401 (K) from her previous employer to the one held by her new employer. A MSG may also be required if Jennifer’s paper stock certificates needed to be probated at her death. 

If obtaining a MSG is a problem because of the number of steps required or it is a service not provided by her bank, Jennifer’s financial institution may transfer the 401 (K) and other securities in the financial institution’s name instead of her name. 

How can you get a MSG?

Jennifer’s financial institution is a member of the Securities Transfer Agents Medallion Program. Two other organizations provide MSGs, the Stock Exchanges Medallion Program, and the New York Stock Exchange Medallion Signature Program. Only specific bank officers can issue MSGs. This personnel limitation is why Jennifer was required to make an appointment to access this service. Jennifer also checked on the limits imposed on the institution’s surety to verify how much they can guarantee. 

Most institutions can provide this service at no or nominal charge. Smaller banks may not have the resources to enroll in these programs and, therefore, may not provide the service. 

We can help by advising you on the many factors to consider when you are transferring securities.

You can schedule a call with us or reach us directly at 855.528.9637 to learn more about how best to plan today to protect those most important to you.

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