Definition Definition

Understanding the Signature Guarantee, Its Prerequisites & Purpose with Example

What is Signature Guarantee?

Signature Guarantee is a type of validation offered by a financial intermediary that checks the legality of a signature as well as the entire demand of the signatories. This sort of assurance is frequently utilized when financial items, such as equities, are exchanged.

Understanding Signature Guarantee

In most circumstances, the guarantor, usually a financial institution, bears full responsibility if the sign is false. Shareholders are protected by signing assurances because they prohibit unlawful transactions and potential investment losses. They also restrict the exchange agent's obligation if the documents are accepted.


There are a few steps that count as absolute prerequisites of this guarantee-

  • Signatories
  • Validation
  • Verification of Stock Holdings
  • Lawful Right to Confirm Verification
  • Assets Value

Purpose of Signature Guarantee

We need a signature guarantee to-

  • Sell assets
  • Shift tangible commodities
  • Alter the holder of an account
  • Reissue missing or damaged documents

Practical Example

Assume Alex, a shareholder, wishes to sell her shares of PQX Company. Alex did not buy the stocks through a stockbroker and rather owns a certificate, which is a legal statement that acts as lawful confirmation of a certain amount of shares in a corporation. 

To sell the documents, Alex must sign these. Unfortunately, even before the buyer agent receives the certificates, the agency demands a signature guarantee to prove Alex's identity. Alex must now contact their financial institution in addition to securing a signing guarantee.

In Sentences 

  • Medallion Signature Guarantee can be obtained from a finance company that engages in one of the Signature Guarantee Schemes, including a banking institution, commercial bank, or brokerage firm. 


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