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Latest Medallion Signature Guarantee Requirements / FYI

edited May 16 in Other Investing
Under the (mistaken) impression that a recent transaction would need a medallion signature guarantee, I inquired about the latest requirements. Thought it worth sharing. The small area bank I consulted (and where I maintain an account) has requirements similar to what BOA has published; however it required only a statement from the “outgoing” institution.

From the late 90s and until sometime after 2000 my recollection is that obtaining the medallion signature, even from a bank you weren’t affiliated with, was a relatively simple matter requiring only a valid DL or other proof of identity. Sometime after 2000 banks began photo-copying the paperwork for their records - a somewhat intrusive practice. More lately, however, many banks are requiring copies of statements from both account(s) involved.

* Seems to me that calling this a “signature guarantee” is a bit misleading. It often involves much more. Perhaps related to federal money laundering guidelines .., ? I wonder too if there’s a “sour grapes” element involved - with the institution wishing your funds were on deposit with them instead of elsewhere?

BOA LINK

From linked source:

“If you’re transferring securities held in accounts outside Bank of America or Merrill with no changes in title or ownership … Documents you need to get your medallion:

(1) Document(s) requiring the stamp

(2) Government-issued photo IDs for all asset owners

(3) Statement for the account holding the securities (dated within one year)

(4) Statement for the account receiving the securities (dated within one year)”

Comments

  • These requirements seem to vary from bank to bank and perhaps state to state.

    I'm in Ohio and last week had some documents stamped with a medallion signature guarantee at a Fifth Third Bank branch. I simply walked in, saw the branch manager and had the documents stamped without even showing an ID.

    My sister is in Hawaii and needed everything that you listed except point 4 for medallion signature guarantees at a First Hawaiian Bank branch in Hilo.

    My experience has been to be ready for anything!
  • I hate a medallion signature. Why can't a notary signature be enough? My brokerage TD Ameritrade doesn't require medallion signature for stuff. It is only when I buy directly from a mutual fund via custodian that they require medallion signature. I go to BoA to get a medallion signature and it is done via a Merryl lynch agent which starts applying pressure to move $ to Merryl and bashes mutual funds. So it is very annoying. For ex, I wanted to change beneficiary at FPA funds and they required medallion signature. WHY? It is very annoying. I changed beneficiary at TD and Vanguard online; extremely easy. I am getting very pissed off when I buy directly from mutual fund and they require medallion signature. Again, I don't understand that. Why is a notary signature not enough? Also I tried to do it at TD bank (where I don't have an account) and they said NO.
  • edited May 16
    I transferred my Roth IRA from Fidelity to a new Vanguard account in 2019.
    Fidelity required a Medallion signature guarantee to complete the transaction.
    My credit union provided the Medallion signature guarantee.
    If I remember correctly, the first three items you listed (under "From linked source:") were needed.
    The transfer forms were sent to Vanguard via USPS (faxing was an option).
    The process went smoothly but took a bit longer than I would have liked.

  • Snippets of rules and regs.....

    The below is from BOA, but typical of other banks:

    --- In order to add or remove an owner and add, remove or update a beneficiary on your Bank of America account, you'll need to schedule an appointment in a financial center. When adding an owner, all account owners will need to be present at the appointment and bring a valid government-issued photo ID.

    Example: Parent or parents want to add an adult daughter(s) or son(s) to their savings/checking account at their bank or credit union. A very good idea in the event of impairment or death of the parent/parents. Control of the account may be maintained for bill paying, etc.; by the daughter(s) or son(s). Account beneficiary(s) as well as a Power of Attorney is a separate matter for this discussion. SO.....mom, dad and adult son (who lives nearby) have to be present together to sign new documents. Later, let's add 1 daughter who lives 100 miles away. Mom, dad, son and daughter all have to be present to sign another new document. Still later, let's add daughter number 2 who lives 220 miles away. Mom, dad, son and daughter number 1, with daughter 2 all have to be present with a bank officer to create another new document.
    I asked a bank officer I know about this process. I asked about which provisions for all of this may be relative to the Patriot Act. She only stated that some policies of the bank were internal to their operation and that other policies were "noted" as a "follow the Federal rules" aspect.

    2005.....Patriot Act compliance, then and renewed/expanded since


    Patriot Act and banking
  • edited May 16
    Fro @Catch’s Patriot Act link above:

    “What Banks Consider to be Suspicious Activity …

    “Another red flag for banks is when you have account activity that is out of the ordinary. For example, if you normally make $5,000 deposits into your business checking account every two weeks, making much larger deposits could trigger an account audit.


    “The Patriot Act does not require banks to notify you that your account is being investigated for suspicious activity. This means that your bank can freeze your account without telling you the reason. While you're in the dark about what is going on, the bank is most likely filing a Suspicious Activities Report with the federal government … .”

    Makes me wonder if transferring a large sum (like $25,000) from a mutual fund to a bank checking account in anticipation of buying a new car or other major outlay would trigger this? Seems to me that if the government was serious about money laundering they’d impose some tighter sanctions on crypto.
  • Thanks for the warning. A few years back I had a med. sig. problem with Grandeur Peaks.
    I closed an account where quarterly withdrawals were going to GP. Called to see what had to be done . They sent me some paper work, which I filled out & sent back. Later to find out a med. sig. was needed. They decided to leave it go, but NO money was going to move for x amount of days.
    Enjoy the day, Derf
  • Here's a similar thread I started a couple of years ago.
    https://mutualfundobserver.com/discuss/discussion/54511/administrative-nuisances-with-some-financial-institutions

    The policies and procedures of different institutions are all over the map. I think that a rational argument can be made for requiring medallion signatures in some cases, but not to the extent that some places do.

    To address @ET91's question about why a notarized signature isn't sufficient: A notarization validates your signature, but not the accuracy or even truthfulness of what you're signing. Consider a certified check. A bank will certify a check that you write only after if verifies that you have the money in your account and it puts that money aside to cover the check. Notarizing a check does not make it "as good as cash". Similar to check certification, medallion stanps guarantee that you do own the stated security in the stated institution.

    It's not unreasonable for the institution guaranteeing the document to review what it is guaranteeing and to keep copies for its records. I agree that it used to be easier to get medallion guarantees - at least to the extent that institutions weren't so restrictive about what they would guarantee.

    Then there are the banks .... I had a similar experience to what @catch22 described - with a relative for whom mobility (rather than distance) was a problem. No accommodation offered. Then there's the pettiness. The only time I've used BofA for a notarized signature (for which they require you to be a customer), the bank insisted on charging me the legal maximum for the service: $2! (I could have billed it to my HOA since I was getting a document notarized for the HOA, but I like to think I have better values than BofA ... at least $2 better:-) )
  • We deal with local credit union offices. Sometimes, there is a more human touch. Sometimes they actually know, rather than guessing. I recall only one instance in which the Manager (next day) wanted to almost insist that I do X, while the Teller told me (previous day) that "X" would not be necessary. It took 20 minutes for the MANAGER to be convinced. As for the Patriot Act and other rules that require so much to deter money laundering: I just plain resent being treated like a criminal. Tail wagging the dog.
  • edited May 16
    @Hank. I own FAIRX. At some point, FAIRX changed the rules. For selling more than $50K worth of shares, FAIRX now requires a medallion signature (ONLINE transaction not via postal mail). I think this is from when people were pulling $$ out of FAIRX in drove (a long while ago when FAIRX went from I think $16-18 billions to $5 billions and now $1 billion). I am not happy with that rule. However, I stuck with FAIRX. Don't ask me why?
  • ISTR that banks didn't like providing medallion signature guarantees because it was a akin to a form of insurance that they might be on the hook for.And I never buy mutual funds directly from the fund company, for the reasons mentioned above!
  • FAIRX added medallion guarantee requirements in the prospectus dated March 16, 2009. One can compare that with the March 31, 2008 prospectus that did not have those requirements.

    FAIRX went from $3.7B as of Nov 30, 2006 to $6.5B as of Nov 30, 2007 to $6.7B as of Nov 2008, to $8.2B as of May 31, 2009, to $10.6B as of Nov 30, 2009.

    Annual figures from 2010 prospectus
    May 2009 figure from 2009 semi-annual report

    There does not appear to have been a deep drawdown around the time the requirements were added. There were however at least a couple of other notable changes made that March.

    First, and my guess for why the policy was changed is that the fund changed distributors. For the past two years it had used Quasar Distributors (an affiliate of US Bancorp Fund Services). It switched to PFPC Distributors (an indirect subsidiary of PNC Financial Services Group).

    Second, the fund made a major change in investment policies regarding securities it could invest in. Previously it could invest "in securities of public companies including ... equity securities, such as common stocks, partnership interests, business trust shares, convertible securities, and rights and warrants [to purchase such securities]".

    After March 16 it would "achieve the Fund's investment objective by investing in a focused portfolio of equity and fixed-income securities." Emphasis added.

    https://www.sec.gov/Archives/edgar/data/1096344/000094040009000260/fairhm77q1.txt
  • @msf thank you for the clarification. I didn't realize the medallion signature was added that long ago. I guess I wasn't paying attention. Thank you again for the clarification. I just assumed that it was added to limit drawdowns. I guess one shouldn't assume but instead do his homework.
  • @carew388 I sometimes buy mutual funds directly from the company to avoid paying transaction fees at brokerage. I guess that is the penalty for being frugal (or cheap). Like I said previously, I was able to go online at Vanguard and TD Ameritrade and change TOD beneficiaries very easily. With mutual funds that I bought directly from the mutual fund company (via a custodian), they all wanted medallion signature even though the I have access to the account online.
  • We had a medallion signature guaranty run around with Vanguard. We had a joint taxable account that we were splitting into two individual trust accounts as part of an estate plan. Vanguard required a medallion signature on the transfer paperwork (even though the names were all the same and the money was staying at Vanguard). We went to our local credit union, but they only guaranty up to $50k. We went to Fidelity, where my husband's 401k is, and they said no because the paperwork wasn't for a Fidelity account. After many, many phone calls to Vanguard, they finally admitted that we could sign up for voice verification and then do the whole thing online. So, might be worth asking about electronic verification alternatives.
  • edited May 17
    I invest directly with four fund companies (Traditional IRA, Roth and non-retirement accounts). Was already aware from past experience that three no longer required a medallion for lower amounts. The one involved here assured me that morning (when I called) that they still required a medallion signature - even for relatively small (4-figure) sums. Hence - the trip to a bank.

    After talking with the bank later that morning and returning home to retrieve a statement, I called the fund house again, stating: (1) I was concerned about the need to “turn over my fund documents to a third party”, and (2) I would need them to send me an updated statement, since I’d transferred the funds involved only recently from their stock fund into one of their more stable funds.

    At that point the representative remarked that they do not require the medallion signature for amounts under $100,000. Sound strange? I can tell you this is not the first time in recent months I’ve gotten “mixed messages” from more than one of the houses I deal with. I suppose we could pursue reasons why that might be … but it’s the case.

  • It's exasperating but I can understand the problem. Reps have to be mindful of two conflicting directives: ensure safety and be responsive to customers. If the house rule is simple and straightforward, there's no question of what to do. But if the company has all these workarounds and exceptions to accommodate customers, it gets messy.

    For example, Fidelity's standard wire transfer form requires a medallion guarantee. But it does have workarounds. One of those workarounds is that you can put (guaranteed) standing instructions on file for a particular transfer and reference those instructions instead of sending in a new form each time you want to wire money to the same recipient. Or for one time transfers, Fidelity can process requests via its secure transmission system (for which you must be logged in).

    If you use that procedure, you have to repeat it each time you send a wire. Nevertheless, I recently sent a second wire to the same recipient that I had wired last year using this "one-time" process. Fidelity was willing to take voice instructions, verifying all the bank information over the phone. Even though the previous wire had been set up as a one-time transaction.

    So there are exceptions and exceptions to exceptions. It's all very confusing for the reps as well as for the customer.
  • ET91 said:

    ... I was able to go online at Vanguard and TD Ameritrade and change TOD beneficiaries very easily. With mutual funds that I bought directly from the mutual fund company (via a custodian), they all wanted medallion signature even though the I have access to the account online.

    Vanguard is a weird one. For several types of transactions it is stuck in the past, requiring actual hard copy paperwork. Yet as you wrote, it allows customers to make beneficiary changes on line. That's true whether you're invested with them as a mutual fund company (with fund accounts like Hank's at TRP) or you're invested with them as a brokerage - through Vanguard Brokerage Services.

    I have accounts set up both ways there. IRAs direct (via a custodian) and a newer taxable account though VBS. I can change beneficiaries for both types of accounts online.

    Vanguard - it's a delicious tasting fund company and the perfect brokerage too. It's two, two, two institutions in one (except legally it's not, and that's a whole 'nuther mess).



  • edited May 17
    I thought the original topic worth airing. Appreciate all the great input from members. Lots of great ideas on this and associated investment subjects.

    Bottom line for me (from the experience related above) is that none of the four fund families I deal with any longer appear to require the medallion for transfers under 50K or 100K (depending on institution). With my retirement distributions consistently coming out of TRP, I can continue to “feed the goose that lays the golden egg” as necessary without the added hassle. Amen. :)
  • +1 msf I made the mistake of transfering my E-Trade assets to Vanguard. Of course, they required a paper copy of my E-Trade monthly statement be mailed to them. So I don't transfer assets to Vanguard anymore. I'm waiting for Vanguard to start requiring paper copies for transfers out of Vanguard !
  • +1 et91 I always try to find ntf substitutes for tf funds. Dodge & Cox has been my exception, but I'm hoping to buy DODIX ntf at Chase You Invest;unfortunately the minimum investment is $2500, but if the minimum changed to $1000, I would buy the fund today !
  • From the above comments a question comes to mind. When transfering fund(s) does the cost bases go along or does the transfer-er have to keep the bases ? The last time I did a transfer it was totally a cash transfer.

    Thanks for your time, Derf
  • It depends on whether the securities are "covered" or "uncovered". If they are covered, institutions are required to transfer what they think the cost basis is. If they are uncovered, they're not required to transfer this information.

    Sounding like a broken record - what a brokerage thinks your cost basis is and what it actually is can be different. You and you alone are responsible for reporting the true cost basis.

    For example, a few years ago I had a wash sale of covered securities across two brokerages. The brokerage where the wash sale took place could not possibly report the correct (adjusted) cost basis of the shares sold since it was unaware of the repurchase in the other brokerage. The brokerage with the replacement shares could not possibly record the correct (adjusted) cost basis of those shares because it was unaware of the wash sale in the first brokerage.
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