Series 24: Improper Use Of Discretionary Accounts

Improper Use of Discretionary Accounts

A discretionary account is one in which the customer authorizes her registered representative to place trades in her account without seeking permission prior to every order. Without discretionary authority, a representative must receive three pieces of information from the client before he can make a transaction in the client’s account:

• • The name of the security
• • Whether to buy or sell
• • The amount of the security to be transacted

A discretionary account eliminates the need to seek permission on every transaction. With discretionary authority, the firm and the registered representative, in effect, have been granted limited authority to act as the