Participating institutions would check signatures used to transfer securities

Participating eligible institutions would have to offer a service to check medallion signature guarantees. Eligible institutions include certain banks, brokers, credit unions, securities organizations, and savings and loan holding companies. The duty applies only when an institution takes part in a recognized signature guarantee program.

A transfer verification guarantee would bind the eligible institution to the issuer, transfer agent, and anyone who relies on it. These rules concern transfers of securities backed by a guarantee from an eligible institution. The guarantee must verify the signer’s identity and authority, be accepted under the signature guarantee program, and come from an institution with no actual knowledge of undisclosed claims against the security. Issuers and transfer agents that accept a guarantee in good faith and follow the stated rules would not be liable for losses caused only by relying on it. They would not have to check identity or authority separately. Federal law controls if it conflicts with this section. The signature guarantee program’s requirements control specified conflicts over whether a medallion stamp was properly used and validated.