Series 7 practice questionmediumAccount Types — Partnership Accounts
A limited partnership wishes to open a brokerage account. Which of the following is TRUE regarding the authority to trade in the account?
- AAny limited partner may place trades in the account
- BThe brokerage firm selects which partners may trade
- CAll partners must approve every individual trade
- DOnly the general partner(s) may authorize trades, as specified in the partnership agreement✓ Correct answer
Explanation
Why D — Only the general partner(s) may authorize trades, as specified in the partnership agreement
In a limited partnership, general partners manage the day-to-day operations and have the authority to make investment decisions and authorize trades. Limited partners are passive investors whose liability is limited to their investment. The partnership agreement specifies trading authority, and typically only general partners are authorized to direct activity in the brokerage account.
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