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Today’s rapidly evolving technology has already led to the disruption of a number of industries. News and entertainment has become far more interactive, movies have gone from the big screen megaplex to the personal 6-inch pocket screen, and the taxi industry has been gutted by the Ubers and Lyfts of the world. One of the more recent industries to see massive disruption is finance. The stodgy, old institutions–happily cultivating their image as conservative and wise—are quickly being forced into uncharted territory.
All this has led to a number of changes in the old rules of facilitating financial transactions – perhaps most notably, a focus on security that’s so strong, it’s leaving many individual stockholders unable to access their own accounts and funds.
“I come from a stock transfer background,” says Seth Farbman, Co-Founder of eSignatureGuarantee LLC, a company that offers an online platform that allows stockholders to obtain a medallion guarantee for the transfer of securities. “So, historically, somebody could just go into a bank, show their driver’s license, and it would be a free service, and they’d be able to get a medallion guarantee. What we’re finding is – and more so over the last year and a half – is that a lot of the banks, both commercial and community, are not offering this service any longer.”
What’s a medallion guarantee? “Anytime someone wants to transfer securities, whether it’s in an actual certificate form, or electronic format, if they want to transfer it to someplace else, they’re required to provide a green medallion signature guarantee stamp,” Farbman says. “And essentially, that lets the transfer agent know that somebody has reviewed the material, and this stamp is confirming that this person who’s signed for it is in fact who they say they are, and they have the authority, or the right to sign this type of document.”
It’s a problem that Farbman has experienced personally.
“I had some stocks in a corporate name,” Farbman explains. “I went to my bank, where I’ve been banking for 30 years, and I asked them for a medallion stamp signature guarantee. And essentially, they said ‘Sorry, the corporate entity doesn’t have an account here.’”
“I said, ‘You’ve got to be kidding me. I’ve been in this bank for 30 years. [I come] every two weeks. You know who I am.’ But they wouldn’t give me a medallion to verify that I was who I said I was. And so, what are people to do? If their bank doesn’t offer this medallion signature, and they have securities, whether it’s $10,000 or $1 million, they’re literally stuck. They have nowhere else to go.”
So, why are traditional banks so reticent to offer the service? “I can’t speak for them, but I’d imagine it’s about liability,” Farbman says. “At the end of the day, when someone provides a medallion stamp guarantee, they’re taking on the liability of that transaction. So, the banks are in the business of banking, and not necessarily taking on this liability. So, they’d rather just not offer it to their shareholders. But, I’d imagine they’d like to see a solution, so at least they can guide them toward getting this transaction done.”
How Does eSignature’s Verification Technology Work?
“As I mentioned, historically, somebody would just go to the banks, show a driver’s license, and that’s how they would prove who they say they were. We took it to the next level.” Farbman says. “So, a shareholder will go online, put in their information, then our technology will generate five questions that only they will know. Things like: Which cars have you driven? Which of these houses have you lived at? What color was your car in 1989? And once they’ve answered those questions, we have a dual factor authentication. So, we’ll send them a code to their phone, and a code to their email.”
It may sound like a lot of steps, but believe it or not, all of that happens within 60 seconds. “By the time they’re done with that, we’re pretty confident that the person either is or is not who they claim to be.”
Perhaps the most persuasive argument for eSignatureGuarantee is the company’s impressive roster of clients. “We’ve really worked with anybody who needs a medallion,” Farbman says. “We’re working with all the large stock transfer agencies, and the shareholders that are bringing us their securities. Whether it’s Apple, Starbucks, Exxon or IBM, we’re really seeing all the big names out there, because, again, it’s a solution that is applicable to anybody in the US who needs a medallion.”
And in an increasingly interconnected global business space, it should perhaps come as no surprise that Farbman is seeing interest far beyond the American borders. “What we find is that a lot of the calls that come in on a daily basis – besides being from trustees, executives or corporations, we’re finding the need from a lot of foreign shareholders,” Farbman says. “So, we’re in the process of developing technology that’s going to be able to validate whether it’s from China, Israel, Canada, the U.K., and I think that technology is where it’s headed, and we’d like to be at the forefront of it.”
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