The Securities and Exchange Commission requires a mutual fund custodian to protect the fund's assets by segregating them from their assets held by the custodian. As described in a fund's prospectus, mutual funds have the right to redeem shares in kind. This means that an investor would receive a portion of the portfolio securities rather than cash, equal in value to the amount of the redemption. A signature guarantee is a means of protecting you and the fund company against fraud. Generally, a mutual fund will ask for a signature guarantee when requesting a large withdrawal, changing account ownership, or requesting monies to be sent to an address other than the one listed on your account registration.
Investors can have their signature guaranteed by a commercial bank.
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