We are being asked to provide a medallion stamp on a document for a non-customer whose power of attorney (POA) agent banks with us. We would be guaranteeing the POA agent’s signature; however, we are not familiar with the situation or the non-customer. What is the best practice in this situation? Should we guarantee the signature of a customer who is acting as an agent for a non-customer?

We recommend reviewing your medallion program administrator’s guidelines regarding the information you need to obtain in order to provide a medallion signature guarantee — the exact information required will depend on the transaction for which you are guaranteeing your customer’s signature. If you are unable to obtain this information, we recommend against guaranteeing your customer’s signature, as you may be held liable to the person relying on your guarantee.

If you are being asked to guarantee your customer’s signature on a POA agreement, the Securities Transfer Association (STA) guidelines provide that “[a] medallion signature guarantee imprint on a copy of the power–of–attorney carries with it a certification that the instrument is a true and correct copy, that it is in full force and effect and that the maker is still alive.” Consequently, you would need to verify that the instrument is a true and correct copy in full force and effect and that the principal (the non-customer) is still alive.

If you are being asked to guarantee your customer’s signature on the assignment, transfer or redemption of a security, the STA Guidelines and STAMP Indemnity Agreement refer to the UCC’s provisions related to signature guarantees. Under the UCC, by guaranteeing a signature, you are making certain warranties to persons taking or dealing with a security in reliance on your guarantee. If you are guaranteeing a signature for an indorser of a certificated security, you are warranting that “(1) the signature was genuine; (2) the signer was an appropriate person to indorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and (3) the signer had legal capacity to sign.” If you are guaranteeing a signature for the originator of an instruction with respect to a uncertificated security, the UCC provides similar warranties, with the caveat that the signature guarantor only warrants that the signer was the appropriate person to originate the instruction (or was an agent with proper authority) “if the person specified in the instruction as the registered owner was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty.” Accordingly, you would need to verify that your customer’s signature is genuine, that they have the authority to sign the document on behalf of the appropriate person (possibly by reviewing the POA agreement), and that they have legal capacity to sign.

For resources related to our guidance, please see:

SEC, Signature Guarantees: Preventing the Unauthorized Transfer of Securities (“An investor can obtain a signature guarantee from a financial institution — such as a commercial bank, savings bank, credit union, or broker dealer — that participates in one of the Medallion signature guarantee programs. The three Medallion signature guarantee programs are the: [1] Securities Transfer Agents Medallion Program (STAMP) whose participants include more than 7,000 U.S. and Canadian financial institutions. [2] Stock Exchanges Medallion Program (SEMP) whose participants include the regional stock exchange member firms, and clearing and trust companies. [3] New York Stock Exchange Medallion Signature Program (MSP) whose participants include NYSE member firms.”)

SEC, Signature Guarantees: Preventing the Unauthorized Transfer of Securities (“If you have general questions about Medallion signature guarantees or how the Medallion program works, you can send an email to Kemark Financial Services, Inc., the program administrator for STAMP and SEMP, at [email protected].”)

STA Guidelines, 1.03 Uses of a Medallion Signature Guarantee (Updated January 2020) (“A medallion signature guarantee imprint on a copy of the power–of–attorney carries with it a certification that the instrument is a true and correct copy, that it is in full force and effect and that the maker is still alive.”)

STA Guidelines, 9.01 Transfer to Agent or Attorney-in-Fact (Updated January 2020) (Transfer requires: (a) endorsement by the principal (with acceptable medallion signature guarantee); or (b) (i) endorsement by the agent or attorney (with acceptable medallion signature guarantee); (ii) a certified copy of the instrument creating the agency or of the power of attorney, containing language permitting the agent or attorney to so act; and (iii) a statement by an acceptable financial institution stating that the power of attorney or agency agreement is in full force and effect and that the principal is still alive.”)

STA Guidelines, 1.03 Uses of a Medallion Signature Guarantee (Updated January 2020) (“Based on the UCC, the intended use of a Medallion Signature Guarantee relates to the assignment, transfer or redemption of a security. Section 8-306 of the UCC relates to the guarantee of a signature of ‘an indorser of a security certificate’ or ‘the originator of an instruction.’ The terms ‘Indorsement” and “instruction’ are further defined in Section 8-102 of the UCC. An indorsement is defined as a signature made on a certificate or a separate document ‘for the purpose of assigning, transferring, or redeeming’ the security or granting the power to assign, transfer, or redeem. An instruction is defined as a notification to the issuer of an uncertificated security directing the securities be transferred or redeemed. The sale of shares is similar to redemption, and will always involve a transfer of the shares being sold. As a result, the sale of shares would also be an appropriate use.”)

STAMP Indemnity Agreement (“The undersigned (‘Guarantor’) has adopted (a) a STAMP Imprint for the purpose of executing guaranties of signatures (within the meaning of Section 8-306 of the Uniform Commercial Code) and for the purpose of executing other certifications and guaranties incident to the transfer, payment, exchange, purchase or delivery of securities, including but not limited to, erasure guaranties and one-and-the-same guaranties, and (b) a STAMP Attorney Release Imprint for the purpose of executing powers of substitution. The STAMP Imprint and the Stamp Attorney Release Imprint are collectively referred to as the ‘Imprint.’”)

Illinois UCC, 810 ILCS 5/8-306(a) (“A person who guarantees a signature of an indorser of a security certificate warrants that at the time of signing: (1) the signature was genuine; (2) the signer was an appropriate person to indorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and (3) the signer had legal capacity to sign.”)

UCC § 8-306 cmt. 1 (“Subsection (a) provides that a guarantor of the signature of the indorser of a security certificate warrants that the signature is genuine, that the signer is an appropriate person or has actual authority to indorse on behalf of the appropriate person, and that the signer has legal capacity. Subsection (b) provides similar, though not identical, warranties for the guarantor of a signature of the originator of an instruction for transfer of an uncertificated security.”)

Illinois UCC, 810 ILCS 5/8-306(b) (“A person who guarantees a signature of the originator of an instruction warrants that at the time of signing: (1) the signature was genuine; (2) the signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty; and (3) the signer had legal capacity to sign.”)

UCC § 8-306 cmt. 3 (“Subsection (b) sets forth the warranties that can reasonably be expected from the guarantor of the signature of the originator of an instruction, who, though familiar with the signer, does not have any evidence that the purported owner is in fact the owner of the subject uncertificated security. This is in contrast to the position of the person guaranteeing a signature on a certificate who can see a certificate in the signer’s possession in the name of or indorsed to the signer or in blank. Thus, the warranty in paragraph (2) of subsection (b) is expressly conditioned on the actual registration’s conforming to that represented by the originator. If the signer purports to be the owner, the guarantor under paragraph (2), warrants only the identity of the signer. If, however, the signer is acting in a representative capacity, the guarantor warrants both the signer’s identify and authority to act for the purported owner. The issuer needs no warranty as to the facts of registration because those facts can be ascertained from the issuer’s own records.”)

Illinois UCC, 810 ILCS 5/8-306(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.”)