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← Series 7: Opens & Maintains Customer Accounts
Series 7 practice questioneasyDiscretionary Accounts — Authorization

For a registered representative to exercise discretion over a customer's account, which of the following is required?

  1. AVerbal permission from the customer on a recorded line
  2. BWritten authorization (power of attorney or discretionary authorization) signed by the customer✓ Correct answer
  3. CApproval from FINRA before any discretionary trades
  4. DThe customer's spouse must co-sign the authorization
Explanation

Why B — Written authorization (power of attorney or discretionary authorization) signed by the customer

A discretionary account requires written authorization from the customer, typically in the form of a limited power of attorney or discretionary authorization form. This document grants the representative the authority to make trading decisions regarding the asset, amount, and action (buy or sell) without prior approval from the customer for each trade. A principal must also approve the discretionary authority.

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