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Series 7 practice questionmediumPower of Attorney — Limited vs. Full

What is the difference between a limited power of attorney and a full power of attorney over a brokerage account?

  1. AA limited POA allows trading only; a full POA allows trading and the withdrawal of funds and securities✓ Correct answer
  2. BA limited POA expires after one year; a full POA is permanent
  3. CThere is no difference; the terms are interchangeable
  4. DA limited POA applies only to retirement accounts; a full POA applies to taxable accounts
Explanation

Why A — A limited POA allows trading only; a full POA allows trading and the withdrawal of funds and securities

A limited (or trading) power of attorney grants a third party the authority to make buy and sell decisions in the account but does not permit the withdrawal of cash or transfer of securities. A full power of attorney grants broader authority, including the ability to trade, withdraw funds, and transfer assets. Both types require written authorization from the account owner and must be approved by a principal.

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