Other ownership arrangements include:

  1. Partnership,Corporations or Unincorporated Associations: A brokerage account can be considered community property or the property of a sole proprietorship, partnership, corporation or unincorporated associations.

    • Investment clubs, groups that pool their money to open a brokerage account, are usually organized as partnerships.

    • For corporate accounts, a copy of the corporation charter must be on file with the broker-dealer to ensure that the entity is authorized to invest through brokerage accounts. It is especially important to make sure that a corporation can engage in margin trading if it has applied for a margin account.

  2. Specific Purpose Accounts: An account could also be held for a specific purpose - saving for college, for example - as in the case of a trust, fiduciary or UGMA/UTMA custody. Custodial accounts must always be cash accounts, meaning that neither option trading nor short selling - which will be discussed soon - are permitted.

    • These kinds of accounts are often managed by an investment advisor with documented power of attorney, a legal instrument that delegates legal authority from the investor to the advisor.

    • This empowers the advisor to make property, financial and other legal decisions for the client - but typically just financial decisions in the case of someone retained strictly to provide professional investment advice.

    • The agent who holds power of attorney is said to have discretionary authority over the account, meaning she need not seek the client's signature before taking or liquidating a position. A registered representative does not need to have power of attorney to have discretionary authority, but she does need written authorization from both her supervisor and the client before exercising it.


The Prudent Man Rule

Related Articles
  1. Investing

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  2. Investing

    What Is A Trading Account?

    A trading account enables an investor to buy and sell securities.
  3. Investing

    Wrap Accounts: A Gift Of Advice?

    Fee-based accounts were banned in 2007, but a on a practical level, this service remains the same for investors.
  4. Retirement

    The Rise of 401(k) Brokerage Accounts

    Many 401(k) plans now allow participants to trade stocks and bonds by offering brokerage accounts inside the tax-deferred plan. Good idea or too risky?
  5. Investing

    The Best Investment Accounts for Young Investors

    What are the best investment accounts for young investors? A few types to consider.
  6. Financial Advisor

    Types of Investors Financial Advisors Should Be Aware Of

    Here's why Financial Advisors should be aware of certain investors, ranging from bond buyers to day traders.
  7. Managing Wealth

    Why Designate a General Power of Attorney?

    Because it will ensure your financial and personal affairs are handled according to your wishes should you ever be incapacitated or unavailable.
  8. Personal Finance

    Handling High-Yield Savings Accounts

    Is this the savings route for you? Read on to find out what these accounts have to offer.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center