Discretionary Accounts

What this video covers

• When a representative crosses the line into full discretion: choosing the security, the action (buy or sell), and the quantity without the customer's per-trade approval
• The three mandatory conditions for a discretionary account: prior written authorization from the customer, written firm acceptance by a principal, and every order ticket marked discretionary at entry
• The time-and-price exception: when a customer names the security, action, and quantity, the rep may pick execution time and price without written authorization, valid only through the end of that business day
• How the Financial Industry Regulatory Authority (FINRA) defines churning relative to the customer's financial resources, objectives, and account character, with no fixed numeric trade threshold and no minimum-activity requirement
• Why options discretionary accounts require a Registered Options Principal (ROP) under Chicago Board Options Exchange (Cboe) Rule 9.4
• The record retention split: six years for account-level authorization and acceptance documents, three years for individual daily order approvals
• Common exam traps: missing one of the three authorization conditions, expired time-and-price orders, and scenarios that look like discretion but are actually customer-directed trades