Signature Validation Program

Tue, 12/11/2012 - 10:10am

What is SVP? The Signature Validation Program is a plan designed to provide protection against fraud and forgery for non-securities transactions that are not covered under section 306 of the UCC. SVP Stamps are used across the investment industry to protect shareholder accounts from unauthorized maintenance or non-financial requests.

How does SVP work? An officer of a financial institution reviews the proper legal documents pertaining to your request, witnesses your signature, and verifies that your signature is genuine by stamping the form or letter and signing his or her name and title. There is a limit of $100,000 per transaction and $200,000 in aggregate for multiple events. An original Signature Validation Program Stamp uses bar codes and special ink and has other security features to deter counterfeiting. For this reason, only originals will be accepted. A notary’s seal cannot serve as an alternative to a Signature Validation Program Stamp.

When is an SVP Stamp required? A Signature Validation Program Stamp is required on certain maintenance and non-financial requests for your protection. When an institution provides an SVP Stamp, it ensures that the signature and instructions are genuinely yours and that you have the authority to provide the instruction(s) contained within the non-financial or maintenance request. You must provide an SVP Stamp when you request any of the following:

  • Name change
  • Add or change a systematic withdrawal plan
  • Add telephone or online purchase or redeem options
  • Add or change beneficiaries for non-IRA accounts (Transfer on Death)
  • Dividends and/or capital gains to be directly deposited into a bank account
  • Requests to add or change bank information to an account (Not required for Automatic Investment Plans)
  • Add check writing to an existing account or to an account established via an exchange or transfer
  • There may be other unique situations that require a Signature Validation Program Stamp.

Who can provide a Signature Validation Program Stamp? Institutions that may be able to provide an SVP Stamp would include:

  • Domestic banks
  • Credit Unions
  • Trust companies
  • National securities exchanges
  • Broker/dealers
  • Clearing agencies
  • Municipal securities broker/dealers
  • Registered securities associations
  • Savings associations (including Savings and Loan associations)
  • Government securities broker/dealers whose net capital exceeds $100,000

The institution from which you obtain a Signature Validation Program Stamp will require certain legal documentation to verify your identity, legal authority, and capacity. Contact the financial institution where you intend to obtain the SVP Stamp to learn what documents you will need in order to obtain it. If your instructions contain a financial request as well as a non-financial or maintenance request, you will need a Medallion Signature Guarantee (MSG) in order to process the entire request.

Challenges with the program

  • Implementing this programmay have some difficulties. There are 153 institutions participating in the SVP and approximately 7,000 MSG participants today. This means that it is not widespread at this time; however, there are several large institutions that will be rolling out the SVP in their businesses.
  • Foreign Countries and UScitizens (non employees) living abroad with holdings in US securities have difficulties with transactions because there is no universally adopted method to “guarantee signatures”.

SVP only protects against fraud and forgery and it does not cover the genuineness of the relevant document.