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What Is a Signature Guarantee?

A signature's legitimacy is confirmed by a financial institution under a signature guarantee.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 November 2014
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    Conjecture Corporation
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Also known as a signature authentication, a signature guarantee is a form of verification in which a bank or some other qualified financial institution confirms the legitimacy of a signature, as well as the request that is being made by the individual who supplied the signature. The intent of the guarantee process is to reduce the chances for fraud when it comes to the transfer of various types of financial instruments. In many situations, the institution that guarantees the authenticity of the signature is held accountable in the event that the signature is later discovered to be a fake.

Only authorized entities are recognized as acceptable guarantors and may offer signature guarantee services. Most banks and similar financial institutions have the ability to authenticate signatures. It is also possible for a member or a stock exchange to authenticate signatures and extend a guarantee. There are also independent agencies that have the ability to examine signatures and determine if they are authentic or forgeries. In many cases, the actual process of examining a signature and determining if it is legitimate or not can be completed in a very short period of time.

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The actual process involved in examining signatures may vary from one guarantor to the next. Today, many guarantors make use of technology to scrutinize every facet of the signature, making sure that it has all the same qualities as verified signatures related to the same individual. For example, a bank would make use of the electronic copy of the signature obtained when the individual opened a checking account, and compare it to any signature on a recent document that is in need of verification. Only after the guarantor is satisfied that the signature is not a forgery is the signature guarantee granted.

The actual signature guarantee is often in the form of a seal that is affixed to the document by the guarantor. In some cases, the guarantor may use a stamp as the indication that the signature is authentic. The seal or stamp serves as assurance that the party who is selling or transferring the securities is the legal owner and has the right to transfer the assets as he or she sees fit. With the increasing potential for fraud today, failing to require a signature guarantee can lead to substantial losses for the receiver. For this reason, buyers should always ask for and receive a signature guarantee when receiving securities.

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