I read with interest the ongoing discussion on the changes following CRH’s move to US listing. It might also be worth sharing a further complexity of holding shares listed in the US.
Following my father’s death, I have been involved as executor in transferring shares to my mother. One shareholding was listed in the US with Computershare as the registrar. They provided the required transfer request form. This required a “Medallion Guarantee Stamp”.
We finally tracked down a company in the UK prepared to provide this stamp but it required a vast amount of identification paperwork. This company also required an indemnity letter from a regulated UK company with additional correspondence and cost. This whole process cost £495 and weeks of paperwork and frustration.
Ms O.K.
Medallion Guarantee Stamps is a term that has only recent crossed my radar but what are they and why would any Irish consumer need to worry about them?
In the general scheme of things, ownership of shares is indicated either by the inclusion of your name on a share register maintained by a registrar – a company that specifically manages a company’s list of shareholders among other things, making sure that details of the proper legal owners are listed – or by physical ownership of a share certificate sent out to you by your broker when you acquired the shares.
Share certificates are a fast-disappearing concept internationally and will shortly fade from the Irish investor lexicon too but, as it stands, they provide absolute proof of ownership which is why shareholders are advised to take such great care of them.
But when you are trading shares listed in the United States, or even just transferring them into another name as in our reader’s case, things get more complicated. The same is true, I gather, for activity in Canadian-listed shares.
Following a clampdown on security after the 9/11 attacks, new rules were put in place which require brokers to provide this Medallion Guarantee Stamp in an effort to prevent fraud. It effectively provides further legal corroboration that the person trying to sell the shares is, in fact, the owner of those shares, and that the signature on the form approving the sale is actually their signature.
That applies even for share transfers by executors where no actual trade of the shares takes place.
It certainly complicates things for Irish investors and that is likely to get worse as a number of other Irish-listed businesses – including Flutter, Smurfit Kappa, Glanbia, Kerry Group and Kingspan – are either in the process of moving their main listings to the US or are rumoured to be mulling over such a move.
So that’s the why. The bigger issue for Irish residents is the how.
Paperwork
As our reader notes, finding someone to provide the necessary paperwork can be a real drama in itself and it is not cheap – a factor that can make it entirely useless for many smaller shareholders.
We had a separate letter on the subject from another reader, Mr G McG, who was in a similar situation as he dealt with his father’s estate – including a small number of Verizon shares – after his father died. As he noted, the cost of securing the Medallion Guarantee Stamp almost came to the value of the shares themselves. That will alarm the large army of former Telecom Éireann shareholders who hold generally small amounts of Verizon stock as a result of the various machinations in that company post-IPO.
We spoke to the three main Irish brokers – Davy, Goodbody and Cantor Fitzgerald. The good news is that Goodbody and Davy provide a service covering the Medallion Guarantee – in cases for free; the bad news is that they will only do so for clients.
They don’t explain why though it is clearly safer for them to corroborate the identity of clients compared to someone arriving in the door with a share certificate whom they have never previously dealt with.
I’m not blind to the fact that it is obviously also a good marketing tool for the companies in trying to persuade investors to sign up as clients – a service for which the client carries continuing running costs.
So what does any “own name” shareholder – an investor holding shares in their own name, generally with a share certificate – do?
Davy, to be fair, tells me that they provide a list of contacts that should be able to help. It is a select group and all are based in the UK, though Finders International does actively operate in the Irish market. The others are IWC Probate Services, Lester Aldridge and Share Data.
Goodbody pointed me to the Computershare website that suggests IWC for shareholders in countries like Ireland.
It is worth noting that not all of them will deal with all US-based share registrars – called stock transfer agents over there – so it is worth checking that they will deal with the company managing the share register of the one you’re invested in before you waste valuable time. For what it is worth, all do seem to deal with Computershare, which is the stock transfer for CRH and Verizon, the stocks most relevant to most of our readers right now.
Cost
In terms of cost, it depends on the value of the shares being sold or transferred.
Essentially, the “entry-level” price covers transactions of up to $100,000 (yes it is the US currency value that counts). Thereafter the price appears to be banded between $100,000 and $250,000, $250,000 and $500,000 and $500,000 and $1 million.
For trades worth over a million dollars – good luck to any readers in that position – the price will generally be subject to individual negotiation.
The actual stamps carry a letter specific to their value, so it will be E for anything under $100,000, D under $250,000, C under $500,000, B under $750,000 and A under $1 million. Above that, it is X under $2 million, Y under $5 million and Z under to $10 million. Get the wrong stamp letter for your trade or transfer and you’re back to scratch again.
A brief check around showed that the most basic service would cost around €310-€320 but this places all the onus for checking that the multiple documents required on the investor.
Given the complexity involved and the additional cost of having to seek a second Medallion Guarantee Stamp in that case, I would suggest investors other than those familiar with the process sign up for a fuller service. An application could be rejected for something as simple as expressing dates in European day/month/year form rather than the US style of month/day/year, for example.
The cost here seems to run from €430-€440 upwards.
That does not include the legal costs, as you will need to go through a solicitor for several of the items required. So you can probably expect to double that cost, ultimately.
What does that mean for the smaller shareholder?
Trouble. There is an army of former Telecom Éireann shareholders out there who had modest holdings in the company. They might have as few as three or four Verizon shares as a result – worth less than $125 at Friday’s market close.
Assuming an all-in cost of €850, which translates to around $803, you would need 26 Verizon shares or 15 in CRH just to meet the cost.
If you can manage it for the £495 (plus frustration) that our reader got it sorted for, that’d be €573 or €$542 – you’re talking about needing 18 Verizon shares or 10 in CRH to pay the bills involved.
It simply is not worth the cost of sorting out the transfer or sale, and you simply end up with a lot of zombie shareholders.
Could the companies involved have done more to explain this process – and the costs involved – to small shareholders before they transferred listings to the US? In my view, absolutely. I think it is unfortunately another example of how the small shareholder is more an irritant than as asset in the minds of many corporates.
The limited relief that I can see is that the cost of securing the stamp can be offset against any capital gain on the trade as it is a cost directly linked to the sale of the shares. If you’re transferring shares under a will as in the case of our readers who sent in the questions – where capital gains would not be an issue anyway – then it is a straightforward cost to the estate.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
