Little Known Service at Your Local Bank: Medallion Stamp
Having an account at a local brick-and-mortar bank or credit union can sometimes be very useful. A reader described his experience in the forum with his local banks when he was in need of a Medallion stamp guarantee (also called a Medallion signature guarantee). As you can read in his post, it can be difficult to get a bank to provide this.
Wikipedia has a good summary of a Medallion signature guarantee:
In the United States, a medallion signature guarantee is a special signature guarantee for the transfer of securities. It is a guarantee by the transferring financial institution that the signature is genuine and the financial institution accepts liability for any forgery. Signature guarantees protect shareholders by preventing unauthorized transfers and possible investor losses. They also limit the liability of the transfer agent who accepts the certificates.
How is this different than a notary public? This BankersOnline.com article summarizes the difference:
The Medallion Signature Guarantee should not ever 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.
More details about the differences are listed in this BankersOnline.com article Medallion Stamp vs. Notary Public.
One type of security that can require a Medallion signature guarantee is a Treasury Bill. The reader who wrote about his experience inherited T-bills, and he needed a Medallion stamp for the Treasury form 1455 that is used to request a distribution of T-bills.
Another type of security that can require a Medallion signature guarantee is an annuity. My dad had a small annuity at Nationwide Financial. When he passed away, I noticed that the annuity claim form required a Medallion stamp if the withdrawal request is greater than $50,000. Since the annuity amount was under this, I didn't have to go through the hassles that the reader described.
Where do you go if you need a Medallion stamp? A local bank or credit union is the first place to look. The institution has to be a participant in the Medallion stamp program. There's a enrollment cost, so many institutions may not be participants. Program participants also have to worry about liability. As described in this BankersOnline.com article, "If the signature turns out to be a forgery your institution will be expected to pay the loss."
Due to the cost and liability concerns, banks will probably only provide the Medallion stamps if you are a customer. This is what the reader described. His local branches of Citibank, Wells Fargo, HSBC and Bank of America only offered this service to customers. Wells Fargo not only required an account, but also required that the account be at least six months old. HSBC required that the customer have a brick-and-mortar account. The HSBC branch refused to provide any service to those with online HSBC accounts. Bucking the recent trend, Bank of America had the best service. According to the reader, the Bank of America branch was willing to provide the stamp even though he only had a Bank of America credit card.
If you are looking for a local bank or credit union, you might want add the Medallion stamp program as another item for your checklist. There are many other features that will likely be above this. I described several of these in my post Finding the Best Free Checking Accounts at the Best Credit Unions. The Medallion stamp may be one reason to keep an account at a large bank. It would be interesting to know how many community banks and credit unions offer this program.
Anonymous - #1, Wednesday, December 21, 2011 - 10:21 AM
Signature guarantees have historically been required by securities firms to transfer securities from one person to another, and by mutual funds to redeem shares. In many cases, they are only requested where the transaction exceeds a certain amount, such as $250K. In the banking area, I've needed them to transfer IRA funds from a mutual fund to a bank. It's the fund that has required the guarantee on the transfer documents, even though I'm a "customer" of both institutions.
nothlit - #2, Wednesday, December 21, 2011 - 10:32 AM
I remember a few years ago I had to get a medallion signature guarantee to link my credit union account to TreasuryDirect. They seem to have gone to the complete extreme recently, however, as a couple of months ago when I linked a different account there was no verification whatsoever (not even the usual trial deposit method).
nothlit - #3, Wednesday, December 21, 2011 - 10:33 AM
*the complete opposite extreme, I meant to say.
me1004 - #4, Wednesday, December 21, 2011 - 11:03 AM
Medallion signature guarantee is the premier one, will be accepted across the board. But many or most banks will also offer their own signature guarantee or another brand, and some places will accept that instead of the Medallion signature guarantee. Ask. Not all banks will offer Medallion, but they very likely will offer their own instead, and that might be acceptable in any particular circumstance. Medallion is basically just a brand.
I also note, while I haven't used one in some years, at least some of them limit their liability, typically to $25,000. Maybe that is not what Medallion does, don't remember -- I have used both Medallion and bank signature guarantees. The liability mentioned here is, at least in effect, an insurance policy, unlike a notary. As somewhat of an insurance policy (I'm saying "somewhat" and "in effect" because I don't know that it actually is classified as that) the liability would be paid out readily. I believe a notary also would be liable, but you would have to file a lawsuit and spend years in litigation -- and securities firms don't feel like doing that.
If your bank doesn't offer Medallion, it most likely will offer another signature guarantee. Ask the securities place whether it will take other than Medallion. I note, normally banks offer signature guarantee free, but I have found at least one of that offered both Medallion and its own, and it charged for Medallion -- so I used the free one, because my mutual fund said that one was acceptable.
I also warn: don't let the bank decide whether you need notary or signature guarantee. Like too many other things, the people at the banks have no idea what they are talking about. Don't even let them decide whether you need Medallion or their own brand -- ask the place you will be presenting it to.
SteveIAm (anonymous) - #5, Wednesday, December 21, 2011 - 12:46 PM
I had an issue with a bank where I have been a customer for about 10 years that refused to give me a medallion stamp. I had inherited a TIAA annuity and TIAA wanted a medallion stamp on the transfer forms. The bank employee said that their bank only gave medallion stamps on stock transfers and not annuities (or mutual fund transfers, etc), and gave me an 8.5X11 inch piece of paper with a lot of 8 point font on it explaining that banks position. They claimed that the medallion stamp was only intended for stock transfers, and suggested I ask TIAA if a notary seal was enough. Fortunately, I had not closed some accounts I had inherited at a second bank and they were happy to give me the medallion stamp on the TIAA paperwork.
Anonymous - #6, Wednesday, December 21, 2011 - 3:18 PM
About 3 years ago was the first time I needed a medallion signature guarantee. While looking for an institution that would give it, I was told by one bank manager that there are different "colors" or levels of medallion guarantees with different dollar limits: $50,000, $100,000, $250,000, $500,000, $1,000,000. A bank branch might offer only the lowest level; the main bank might offer a higher level; and maybe neither one offers the highest level. Presumably the institution must pay a higher fee for a higher level of guarantee; so maybe the customer will be charged more for a higher level of guarantee.
me1004 - #7, Wednesday, December 21, 2011 - 4:07 PM
StevedIAm: exactly! As I said, "Like too many other things, the people at the banks have no idea what they are talking about. Don't even let them decide whether you need Medallion or their own brand ..." Or whether it is only for stock transfers. (I often have to use it just to give any new instructions to a mutual fund.)
Anonymous #6: thanks for filling that out. That's what I was referring to. The $25,000 level I mentioned might have been a bank brand rather than the Medallion brand. But I thought Medallion also had limits.
Ken, your story is saying the bank giving the stamp would be liable for any transaction based on it. I think that not quite true. They would be liable to the amount specified, as per anonymous #6. You might want to clarify that in the story.
Anonymous - #8, Wednesday, December 21, 2011 - 9:23 PM
deju vu:
http://www.depositaccounts.com/blog/2010/10/choosing-a-new-bank-why-you-want-at-least-two-banks-or-credit-unions.html#41334
Anonymous - #11, Thursday, December 22, 2011 - 4:06 AM
Personally, I dont blame the banks. The stamp is meant for individual money transfers. A lot of places like treasurydirect are using it for ID checks. Thats the job of a notary. But because notarys can be easily forged, they want something more secure, and banks are not willing to stick their neck out.
RJM - #12, Thursday, December 22, 2011 - 7:14 AM
I needed one a few months ago. The branch manager at my little small town wells fargo balked.
Refused to do it.
He ended up notarizing it and the other party accepted it but he couldnt grasp that ALL he was guaranteeing was my signature. It was a document saying I sold some stock months prior and he was talking about checking the market price on the date of sale. (Which is totally irrelevant but I didnt bother arguing with him)
tightwad - #13, Thursday, December 22, 2011 - 2:54 PM
Good article and info posters! I learned something today. Nice to see intelligent info shared.
Anonymous - #14, Thursday, December 22, 2011 - 4:04 PM
RJM- I've gotten the Medallion Signature Guarantee from several different banks and credit unions. Some do check the value of what they are stamping. One of the bankers told me he had to check because their stamp was only good for $25,000 (as #6 stated, there are various limits) so he could only stamp documents for transacations under $25K
rjm (anonymous) - #15, Saturday, December 24, 2011 - 8:29 AM
All the $25 limit means is that IF i ended up somehow faking who I was, the banks max liability would be $25k.
Doesnt matter if its a $500k transaction, he is still ONLY guaranteeing my signature. Nothing else.
Its supposed to be like a notary only better. But, in backwoods alabama, I doubt the guy sees them more than a few times a year if that.
Thanks for your comments though.
Chyvan (anonymous) - #16, Sunday, December 25, 2011 - 1:20 PM
I would encourage anyone doing business with an entity that requires Medallion Guarantees to quit doing business there and tell them why. The program is being seriously abused by many mutual fund companies. I was doing business with Chase's One Group Funds. They wanted a Medallion Guarantee on an automatic $250/mo invest form. The amount of work on my part to protect them from a miniscule loss caused me to rethink that relationship.
Anonymous #1 (anonymous) - #17, Thursday, February 9, 2012 - 3:54 PM
Very interesting info, but I can tell you as an executor to an estate that has over $500,000 in stock, it is a major pain the butt. Some institutions will go as high as $100,000. The limit that they choose is based on what amount they have on their Surety Bond. Unless the institutions are very lax especially if they are dealing with a known customer I would imigine the risk factor is very low. However the stock transfer companies ALL require the stamp when transferring stock. I just started looking and I am finding out that it is difficult to find someone to provide the service.
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