3.12.2. Improper Use of Discretionary Accounts
A discretionary account is one in which the customer authorizes her registered representative to place trades in her account without seeking permission prior to every order. Without discretionary authority, a representative must receive three pieces of information from the client before he can make a transaction in the client’s account:
• The name of the security
• Whether to buy or sell
• The amount of the security to be transacted
A discretionary account eliminates the need to seek permission on every transaction. With discretionary authority, the firm and the registered representative, in effect, have been granted limited