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.
The Prudent Man Rule


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