Series 7 practice questionmediumDiscretion and Account Supervision 2
A customer asks a representative to accept a written discretionary trading authorization. What is the best response?
- ANo supervision is required once the customer signs
- BThe representative may use oral discretion indefinitely
- CThe customer must be an accredited investor only
- DA principal must approve and accept the account promptly under firm procedures✓ Correct answer
Explanation
Why D — A principal must approve and accept the account promptly under firm procedures
Discretionary activity is heavily supervised because it gives the representative authority to act without obtaining contemporaneous consent for every trade detail. FINRA rules allow limited same-day time and price discretion, but broader trading discretion requires proper written authorization and supervision.
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