Series 53: 3.1.3.5. Discretionary Trade Restrictions

3.1.3.5. Discretionary Trade Restrictions

As we have seen, broker-dealers are not allowed to make discretionary trades unless the customer clearly permits it in writing ahead of time and unless the trade has been determined to be suitable for the customer’s needs. Typically, a customer will provide written discretionary authorization to the firm’s registered representative, often when opening the account, so that written permission is not required before each transaction.

However, a broker-dealer has other disclosures to make prior to executing a discretionary trade.

A broker-dealer generally cannot execute a transaction for a customer with a discretionary account unless it first determines that the transaction is suitable for that customer. Transacti