What is the purpose of a Medallion Guarantee?

The purpose of a Medallion Guarantee is to authenticate signatures on documents pertaining to securities or investment transactions, which is critical in safeguarding against fraud. When a financial institution provides a Medallion Guarantee, it guarantees the signature of the person endorsing the security transfer, ensuring that the transaction is conducted securely and that the signatory is indeed who they claim to be. This process helps streamline transactions involving stocks, bonds, and other financial instruments, providing assurance to both buyers and sellers in the financial market.

The Medallion Guarantee also serves to protect the institution that guarantees the signature by mitigating the risk associated with fraudulent transactions. When a Medallion signature is applied, it carries a unique identification and the responsibility of the financial institution behind it, making it a robust mechanism in the realm of financial transactions.