Improper Use of Discretionary Accounts
A discretionary account is one in which the customer authorizes her financial adviser 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 she 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 requirement that a financial adviser seek permission before each trade she executes for a client. When discretionary authority is granted, a firm and its registered representative, in effect, have been granted limi