Customer Funds, Custody, and Discretion: Rapid Fire

What this video covers

• Why commingling (mixing client and firm assets) and conversion (stealing client assets for personal use) are always prohibited with no exemption, and how the exam uses "temporary" mixing as a trap
• How the AAA test defines discretion: an order is discretionary if the professional decides the asset, action, or amount without client prior approval
• Why time-and-price direction is not discretion, even when the professional picks the exact timing and execution price
• The critical difference between investment adviser discretionary authorization (written, in advance, before the first trade) and broker-dealer or agent discretionary authorization (oral first, then written within 10 business days)
• What separates limited trading authorization (trades only) from full trading authorization (trades plus withdrawals of cash or securities)
• Which standard of care applies to which role: best interest or suitability for broker-dealers at recommendation, fiduciary duty for investment advisers, and prudent investor standard for trustees
• How churning and acting outside the scope of authority create violations even in properly authorized discretionary accounts