Third-party Accounts
Most customer accounts involve two parties: (1) the customer, or owner, of the account, and (2) the broker-dealer, acting on the directions of the customer. In some accounts, however, a third party may be authorized to direct the dealer to take action on the account in addition to or instead of the customer.
Fiduciary accounts are one example of a third-party account. In this case, a fiduciary is the third party, who acts on behalf of the customer and is required to put the customer’s interests above her own in managing the account. The administrator of a trust or guardian account is an example of a fiduciary.
Discretionary accounts are another type of third-party account. The third-party here is the broker-dealer, who has been given written authority by the customer to buy and sell securities on his behalf without the client’s prior approval. A discretionary trade gives the broker-dealer discretionary authority