Signature Guarantees

hank

Recently I considered linking one of my mutual fund houses to an area bank. Doing so would allow direct transfers of assets from the fund house to the bank via EFT. The fund company specified I obtain a Medallion signature guarantee on the documents I would mail them to set up this link. That sounded reasonable and I have no quarrel with the fund company.

I spoke with a bank agent (same bank that was to be so linked) about obtaining the guarantee. He said that to obtain the signature guarantee from him I would first have to provide a complete fund statement detailing all my investments & amounts at the fund house. I said I only needed to establish a link to the money market fund and would provide documentation for that fund alone. His reply was that would not be adequate because I might use the money market fund to in effect "funnel" funds to the bank from the other accounts.

I've decided to leave well enough alone and not set up the link rather than turn over so much information (I know from past experiences banks typically photo-copy and retain these documents.) But, I remain curious as to whether/why such an intrusion into seemingly private matters is necessary when obtaining a signature guarantee and what possible motive the institution granting the guarantee would have in requiring so much information?

Thanks for any thoughts ----- especially if you've had first hand experience either as a client or financial professional.

cman

Something isn't clear here. Do you just want to transfer cash between your brokerage and bank account or do you want to transfer "assets" as in stocks, mutual fund shares, etc in kind. Typically signature guarantee is not required for the former only for the latter.

If the former, you may not have communicated precisely with the brokerage or they may have misunderstood.

Both Vanguard and Fidelity, for example, allow you to link bank accounts to your brokerage account entirely online. Vanguard verifies by making a few cent deposits before activating. I have done this with both for multiple banks.

You don't have to talk to the bank for this at all.

If you are transferring shares or securities, there may be more paper work.

Just make sure you always initiate cash transfers from the broker side since banks may have fees for sending out.

rjb112

I've obtained medallion signature guarantees (to link mutual fund companies' accts to my bank acct) at my local bank without the bank requiring any information other than my identification and the forms from the mutual fund companies to stamp and sign. And this is at one of the largest banks in the U.S. Your bank's agent seems off base here. If you want to "funnel" (transfer) money from the other accounts to your bank account, that is perfectly fine. You can transfer cash from your bank to a mutual fund to purchase shares (via the link), and you can sell shares at the mutual fund company and transfer the cash proceeds to your bank account via the link. It's your private matter, IMO.

hank

Thanks cman. As I stated, the purpose was to allow me to make electronic fund transfers (EFTs) of cash from a money market fund (at a major mutual fund house) into a personal savings account (at a traditional bank). It was essentially an "authorization" form. It stated quite clearly where you sign at the bottom that a Signature Guarantee was required.

I wasn't aware that such authorization can be delivered by me to the fund house online. I'll look into it!

msf

Things are not always as straightforward as one would expect.

I have a fund account with a major mutual fund family (I will name the family - Legg Mason). In order for dividend checks to be direct deposited into another institution, they require a written form with signature guarantees. Not just my signature either, because I want to the dividends to go into a joint account. They want signatures (and guarantees) for all the recipient account holders.

I posted this (don't remember where) some time ago, and the response was that this was not unusual.

And I have had institutions that were guaranteeing a signature want to know exactly what they were guaranteeing. But the idea that you should have to show any information about other accounts seems beyond the pale. Why don't they want to know what funds in other families you may have linked the account to already? After all, you might be funneling those funds as well.

Then there's CapitalOne 360 (formerly ING Direct). They will link to another bank, but not to a brokerage. However, you can link your brokerage account to them, and work around that obstacle. No standardization, lots of quirks in these financial systems.

MourningStars

I agree with cman. Perhaps the old two step would work. Transfer from fund company money market to your checking and then from your checking to your savings. Always know that any bank secretly believes your money in their care belongs to them unless you know your place when it comes to their rules.