Limited Discretionary Account

DEFINITION of 'Limited Discretionary Account'

A type of account in which a client allows a broker to act on his or her behalf in buying and selling securities. In this case, the broker can make certain types of trades without prior consent from the client. In order for this arrangement to take place, the investor has to sign an agreement stating that they are allowing certain trades without consent.

This type of account is also referred to as a "controlled account".

BREAKING DOWN 'Limited Discretionary Account'

This type of arrangement empowers a broker or advisor to initiate a certain trade on behalf of the client. The agreement will also specify any of the client's limitations. A client who gives a broker or advisor this type of power must have complete trust in the person, as the arrangement can be risky. However, any decisions a broker or advisor makes must coincide with the client's goals.

RELATED TERMS
  1. Agency Broker

    A broker that acts as an agent to its clients. When acting as ...
  2. Give Up

    A procedure in securities or commodities trading where the executing ...
  3. Full Trading Authorization

    A level of trading authorization that grants an agent or broker the ...
  4. Limited Trading Authorization

    A level of trading authorization that gives an agent or broker the ...
  5. Half Commission Man

    A half commission man is an individual who introduces clients ...
  6. Agency Cross

    A transaction in which an investment adviser acts as the broker ...
Related Articles
  1. Financial Advisors

    Top Tips for Inheriting a Book of Clients

    Inheriting another advisor's book of clients can be a big boon. Here are some tips on how to handle the transition.
  2. Investing Basics

    Investment Advisor Versus Broker: How They Compare

    What is the difference between an investment advisor and a broker?
  3. Financial Advisors

    Losing a Client Is Not Always The End of The World

    Losing a client is never pleasant for a financial advisor, but sometimes this is a better outcome than continuing the relationship.
  4. Financial Advisors

    Advisors Need to Talk Less, Ask and Listen More

    Financial advisors spend a lot of time giving their clients advice on how to invest their money. But what they often forget to do is listen.
  5. Professionals

    Broker Or Trader: Which Career Is Right For You?

    Both brokers and traders buy and sell securities, but there are some subtle differences between the two careers.
  6. Professionals

    How Often Should You Contact Clients?

    Figuring out how often an investment advisor should contact clients is not easy.
  7. Options & Futures

    Broker Or Trader: Which Career Is Right For You?

    A day in the life of a broker or trader is an exciting and varied one. Find out how to decide between these two financial professions.
  8. Your Clients

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  9. Financial Advisors

    The Difference Between Good and Great Advisors

    If you want to be a top advisor, it takes more than just hanging out your shingle and picking investments. Top advisors work at perfecting their skills.
  10. Brokers

    Choosing A Financial Advisor: Suitability Vs. Fiduciary Standards

    Discover the differences between the Suitability and Fiduciary Standards when hiring a financial advisor.
RELATED FAQS
  1. What is the difference between a broker and a market maker?

    A broker is an intermediary who has a license to buy and sell securities on a client's behalf. Stockbrokers coordinate contracts ... Read Answer >>
  2. I'm new to this. Can I sell or buy stock by myself?

    In order to buy stocks, you need the assistance of a stock broker since you cannot just phone up a company and ask to buy ... Read Answer >>
  3. I want to start buying stocks. Where do I start?

    Before you jump into buying stock, first take the time to learn what type of broker-dealer may be right for you. Read Answer >>
  4. Does a broker always have to buy a stock if I want to sell it?

    There are certain times when a broker must purchase the stock that you are selling. For example, if the broker is a market ... Read Answer >>
  5. What fees do financial advisors charge?

    Learn how much financial advisors charge clients; discover the various payment plans available to customers seeking financial ... Read Answer >>
  6. Does the party loaning shares in a short sale transaction benefit in any way other ...

    To answer this question, we first need to clarify who is doing the lending in a short sale transaction. Many individual investors ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center