Limited Discretionary Account

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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".

INVESTOPEDIA EXPLAINS '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.

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