One of the cornerstones of the securities transfer function is the signature guarantee. Without such a feature, the securities industry as we know it would function only with great difficulty and with significantly higher costs. A guarantee of a person’s signature is required by all Transfer Agents before a security transfer can take place and SEC Rule 17Ad-15 requires that Transfer Agents adopt an equitable methodology for the acceptance of signature guarantees from eligible Guarantor institutions. SEC Rule 17Ad-15’s stated purpose is to:
"…provide for the protection of investors; facilitate the equitable treatment of financial institutions which guarantee signatures of endorsers of securities; increase the efficiency of the security transfer process; and reduce the risk associated with a signature guarantor’s inability to meet its obligations."
The Securities Transfer Agents Medallion Program, Inc. (STAMP, Inc.) is a not-for-profit corporation that owns and, together with Kemark Financial Services, the STAMP Program Administrator, operates the official signature guarantee program that is recognized and approved by the financial industry and that is supported and endorsed by the Securities Transfer Association (STA).
The STAMP Program facilitates the equitable treatment of eligible Guarantor institutions and promotes the prompt, accurate, and safe transfer of securities by providing the Transfer Agent with protection against risk of financial loss if it has no recourse against the Guarantor. Transfer Agents and others who rely on a signature guarantee from a member of STAMP are protected against loss from wrongful endorsements if the Guarantor is unwilling to meet, or is incapable of meeting, its financial obligation under its Program Indemnity Agreement.
Once a Guarantor joins the STAMP Program, it must acquire the necessary STAMP Medallion imprinting equipment and obtain Surety Bond coverage, which in many cases can be obtained at nominal cost from the Guarantor’s existing insurance carrier.
In addition, Program Procedures require that all Guarantors receive “certification” from the Program in accordance with strategies focused on individual employee “certification.” Guarantor certification is achieved through prescribed training of relevant personnel, supported, in turn, by the availability of further online learning and assistance.
Guarantor certification has as its primary goal safety and soundness in the application of an institution’s Medallion imprint. This goal is accomplished through a well developed awareness of the legal framework and issues, including potential Guarantor liability, when providing a signature guarantee in connection with the transfer of a security. Certification training topics include:
- Section 8-306 of the Uniform Commercial Code.
- Proper and Improper Uses of the Medallion Stamp.
- STAMP Surety Bond.
- Medallion Signature Guarantee Best Practices; Know Your Customer.
- Best Control Practices; Safeguarding the Medallion Stamp.
- Medallion Stamp Imprinting and Verification.
If you are interested in joining the STAMP Medallion Signature Guarantee Program or you are already a participant and would like additional information concerning Certification or other educational materials, please contact Kemark Financial Services, Inc. at (845) 620-9300 or visit the Kemark website at www.kemarkfinancial.com.