SEC Backs Thrifts as Guarantors
WASHINGTON - The Securities and Exchange Committee has proposed giving thrifts and credit unions a fair opportunity to guarantee signatures on securities.
The proposal, unveiled Tuesday, would require securities transfer agents to adopt and adhere to written standards for accepting or rejecting signature guarantees.
Thrifts have complained for years that transfer agents, such as banks and trust companies, have systematically prevented them from providing signature guarantees for their customers.
Visits to Competitors
Because their signature guarantees are not widely accepted, thrifts are "forced to take customers across the street to a broker or a big bank," said Thad Woodard, president of the North Carolina League of Community Financial Institutions.
To remedy inequities, the SEC wants to require transfer agents to spell out their criteria for signature guarantors, including creditworthiness standards such as minimum capital requirements. The SEC is not proposing to set the standards itself.
When shares change hands, transfer agents cancel the old securities and issue new certificates to the new owners. But most states hold agents liable for loss if they accept forged endorsements or permit unauthorized transfers.
A Way of Reducing Risk
To reduce their risk exposure, they often require shareholders to obtain a financial institution's guarantee that the signature on transfer documents is genuine.
Many commercial banks provide signature guarantees at little or no cost to customers, and these are widely accepted by transfer agents. But the SEC noted in its proposal that many transfer agents reject signature guarantees from savings and loans, arguing that it is risky to accept them from unknown or troubled institutions.
Mr. Woodard called the SEC proposal "very positive and long overdue."