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SIE practice questionmediumDiscretionary Accounts

Which of the following is required BEFORE a registered representative can exercise discretion over a customer's account?

  1. AA minimum account balance of $25,000
  2. BApproval from FINRA
  3. CWritten trading authorization (power of attorney) from the customer✓ Correct answer
  4. DVerbal authorization from the customer
Explanation

Why C — Written trading authorization (power of attorney) from the customer

Before exercising discretion — meaning the rep chooses the asset, action (buy/sell), or amount — the customer must provide written authorization, typically a limited power of attorney. Verbal authorization (A) is not sufficient for discretionary authority. FINRA approval (C) and minimum balances (D) are not requirements for discretionary authorization. Note: if the customer specifies the asset and action but lets the rep choose only the time or price, this is NOT considered discretion.

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