Series 7

Customer Accounts - Other Types of Accounts

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.



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