Terms > This page
Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order
bills of exchange, notes, bonds, stock certificates, and paper money with
false signatures or false denominations; false instruments with genuine
signatures; or COUNTERFEITS. To
minimize losses due to forged stock and bond certificates, the New York
Stock Exchange requires all certificates of stocks and bonds listed to
be engraved with quality and standards satisfactory to the Department
of Stock List. Further, the
exchange requires the company applying for listing to maintain a separate
and independent transfer agent or office and registry office or registrar
in the financial district, the function of the registrar being to authenticate
certificates issued and check against over-issuance of authorized amounts.
Also, all certificates (stocks and registered bonds) must carry
signatures, guaranteed by a member, member firm, or commercial bank or
trust company having principal office in the financial district of New
Uniform Commercial Code specifies that the bank's customer, upon receipt
of the usual monthly bank statement accompanies by cancelled checks or
other honored items, shall within a reasonable time examine the items
to discover whether any of the customer's signatures are forgeries or
unauthorized or whether any of the items have been altered.
If the customer fails to do so, the bank cannot be charged for
honoring such a challenged item as to unauthorized signature or any alternation
if the bank also establishes that it suffered a loss by reason of such
failure. Moreover, if the customer fails to discover and report the
unauthorized signature or alternation after the first item and statement
were available to the customer for a reasonable period not exceeding 14
calendar days, the bank cannot be held liable for any further payments
made to the wrongdoer before the bank is notified by the customer.
the foregoing protection for the bank is notified by the customer.
the foregoing protection for the bank does not apply if the customer
establishes lack of ordinary care on the bank's part in paying the items.
But regardless of care or lack of care of either the bank or the
customer, failure by the customer to discover and report unauthorized
signature or alterations one year from the time the statement and items
are made available or failure within three years to discover and report
any unauthorized endorsement will preclude action against the bank (Sec.
4-406, Uniform Commercial Code).
paying a forged check is one of the chief risks with which a bank is confronted,
banks should educate their depositors to protect their blank checks as
a means of combatting this risk.
Depositors should keep blank checkbooks under control and be able
to account for each of the series.
Checks should not be signed in blank nor should blank checks be
given away to strangers.
Back to Information