stamp and medallion program basics - shareholder … · reliance on the guaranty” for losses ......

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Transfer Association, Inc.

The STA Securities


STAMP and Medallion Program Basics

Panelists: Andrea Manning Kathryn J. Sevcik Corporate Counsel Senior Vice President Computershare Inc. Wells Fargo & Company

Disclaimer

The information provided in this webinar represents the

current understanding of the presenters and the

Securities Transfer Association. It is subject to change.

In no way should this information be construed or relied

upon as legal or operational advice. You should consult

with your own legal counsel, compliance officer and/or

other subject matter experts.

4/27/2017 WWW.STAI.ORG 2

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Medallion Signature Guarantee Basics

What is it?

A signature guarantee under one of the three Medallion programs:

− STAMP (Securities Transfer Agents Medallion Program)

− SEMP (Stock Exchanges Medallion Program)

− MSP (New York Stock Exchange, Inc. Medallion Program)

Programs started in 1992 to provide financial backing to signature guarantees

Each stamp has a surety bond in a specific amount backing the guarantee

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Why is it needed?

− Based on Uniform Commercial Code (UCC)

− UCC holds an issuer and the transfer agent liable for wrongful transfers (§8-104)

− UCC provides issuer may require a signature guarantee to ensure the effectiveness of an indorsement or instruction for transfer (§8-402)

− Longstanding industry practice to require

Question: Any institutions/persons exempt?

- No exemptions per se, but STA recommendation to waive for DTC

- Each agent may have different situations where it would waive requirement

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Medallion Protections

UCC Protections (§8-306):

Signature guarantor warrants:

− Signature is genuine

− Signer was appropriate person

− Signer had legal capacity

Guarantor is liable “to a person taking or dealing with the security in reliance on the guaranty” for losses resulting from a breach of the warranties

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Medallion Protections Program Protections: Surety bond protection

- Surety limits are the amount of the stamp per transaction, and an aggregate of 2x the surety bond amount over the life of the bond

- “Per transaction” includes all certificates in a presentation for the same CUSIP and guarantor

Indemnification of issuers/transfer agents per agreement

Claims process Mechanism to comply with SEC Rule

17Ad-15

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Stamp Amounts and Coverage

Question: Is splitting up large dollar transactions to accommodate the value limit of a Medallion a good idea?

Risk determination

Understand the limits per transaction and in the aggregate

Guarantor always responsible for entire amount under UCC

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Appropriate Uses

STA Guidelines recently amended to provide further guidance (Section 1.03)

Under UCC, intended use for “assigning, transferring, or redeeming” – would include sales

Under STAMP Indemnity Agreement, also includes “executing certifications incident to the transfer, payment, exchange, purchase or delivery of securities” − Examples: certifying document such as

birth/death certificates, corporate resolutions as true and correct copy of originals

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Appropriate Uses Question: What is the difference between an MSG and Notary Stamp? Authorized/appointed under state law A notary public verifies the identity of the

person signing, ensures the person is freely/willingly signing, witnesses the signature, and in some cases administers an oath

Generally no financial backing to notarization (similar to surety bond)

Not a “signature guarantee” and thus does not include warranties under the UCC

Notaries may be personally liable for improper notarial acts

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Electronic Documents/Signatures

STA Guidelines provide that:

− Photocopy of transfer instruction sufficient as long as stamp is original

− Electronic signature (of shareholder) sufficient

− Recommendation to require original document/signature if over $14M

Question: How is “electronic signature” defined?

Various methods to affix signature – digital, facsimile, DocuSign or other means

Essentially any electronic method other than original signature

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Electronic Documents/Signature

Question: How does the guarantor reconcile that the owner is present at the time of signing? The guarantor needs to make its own

determination as to the method to validate the signature of the shareholder

Guarantor ultimately responsible Generally customer of the guarantor, if

not, some identity verification Signature may be submitted through

authenticated means STAMP’s online certification training

program including best practices for guarantors

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Program/Technical Questions

Question: We often get requests for improper uses of medallion guarantees & it comes from paperwork a company is needing signed. . . . Are there any attempts from STAMP to stop this type of use?

STA Guidelines address appropriate uses

STAMP’s online certification training program (for Guarantors) also addresses

Risk to guarantor in providing such guarantees and in transfer agents’ relying on guarantees

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Question: How to check the validity of the Medallion and whether Kemark can walk through program screen shots.

Using the webCheck feature of MedallionPrograms.com is the only method by which a TA can verify the current status of a particular MSG imprint

Any TA representative who is not familiar with the site, can email [email protected] and the Program will arrange for a private tour of the website

mailto:[email protected]

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Question: Do the MSG stamps with an imprinted signature in the middle also require a wet signature as well?

STA Guidelines provide signature must be in either manual or facsimile form

The MSP Medallion Imprint can be used by NYSE members as an endorsement of securities in their names pursuant to procedures unique to MSP

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Question: As a transfer agent I see many stamp

imprints over text, even when blank space is available. . . . Is there a way to stress to brokers and their operations areas that clear readable imprints are a must?

This area is addressed within STAMP’s online certification training program. In fact, one of the lessons (entitled “Medallion Imprinting and Verification”) is dedicated to the importance of

proper imprinting techniques. Also, TAs can report chronic offenders to

[email protected] and the Program will reach out to those Guarantors. TAs can be part of the solution by reaching out to Guarantors directly.

mailto:[email protected]

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Challenges Getting Medallions

Question: Medallions are getting harder to obtain. What is the best advice for investors? This has been a challenge throughout the

life of the program The Program continues to look at ways to

expand − Investment Advisors − Law Firms − Global Firms

New website to be launched MSGLookUP.com − Database of guarantors in STAMP program − Tool for Issuers and Agents

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Best Practices Question: Guarantors should inform their customers what they are required to present. What are some of the best practices?

Require a statement for book-entry (DRS and plan) shares − Ensure the account number is written on

instruction form and that it matches the statement

Require the certificate for certificated shares Require documents they would need if

closing a checking, savings, brokerage account

Check the STA Guidelines

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Best Practices Question: The Security Specific POA is cumbersome and misunderstood. What advice do you give when joint owners are in two separate locations?

The Security Specific POA was the result of an industry initiative to address the challenge

Users still need to understand state law for specific requirements that may apply to powers of attorney

Discuss with your attorneys to create a Security Specific POA form acceptable to your organization

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Best Practices

Question: What are best practices for transactions valued over $14 million? Refer to the STA Guidelines for specific

transactions and recommended practices

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Best Practices

Question: Why should MSGs not be dated?

MSG should not be dated or notated − Calls into question what the guarantor is

guaranteeing

Intent is that the guarantee is for the specific transaction when the STAMP is affixed with no requirement for the agent to validate − If the transfer instruction with the medallion is

dated prior to the death of the shareowner, it doesn’t necessarily mean that the transfer is not valid

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Best Practices Question: What are best practices for acceptance of electronic stamps and/or pdf copies for transfers?

Require an original stamp Recommendation to require original

signature and documents for values over $14 million

Electronic medallions for DRS Profile are built into the DRS Profile program

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Best Practices Question: What constitutes a valid and acceptable signature guarantee if not a medallion guarantee?

The MSG carries surety and protects the issuer and transfer agent

Review your medallion procedures under 17Ad-15

Each agent and issuer should determine their risk tolerance level prior to accepting a request without the MSG

Issuer direction and indemnification to the transfer agent for accepting requests without the MSG

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Best Practices Question: Can the same medallion be applied individually to each separate transaction for the same account on the same day?

Transfer agents and issuers should

understand the guarantor’s surety bond limit − Value per transaction − Aggregate value is 2X surety bond amount

for the life of the bond Need to understand your risk tolerance and

other mitigating procedures and policies

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Best Practices Question: Would you provide additional clarification on the types of items that might fall under “certification incidental to the transfer, payment, exchange, purchase or delivery of securities”? Certifying that the document is true,

complete, and correct copy of the original − Birth Certificates − Death Certificates − Corporate Resolution − Power of Attorney

Also includes that the document is in full force and effect and the maker is still alive

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Best Practices Question: Should agents accept stock powers where the amount has been increased or does the medallion imprint near the increased amount suffice? Agents should compare the value of the

changed amount and determine if it fits within their risk tolerance.

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QUESTIONS?

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