Laws & RegulationsQuestion 95 of 110
An investment adviser exercising discretionary authority over a client account must generally obtain what?
a.Nothing beyond an oral instruction for each trade
b.A performance-based fee agreement
c.Prior written authorization from the client granting discretion
d.Approval from FINRA for each transaction
Explanation
To exercise discretion, choosing securities, amounts, or timing without contacting the client for each trade, an adviser must generally obtain prior written authorization, such as a limited power of attorney or discretionary agreement. Limited time and price discretion may be treated differently, but full discretion requires written client consent. This protects clients from unauthorized trading.
Law Reference: Investment Advisers Act of 1940Practice all 110 questions free — no signup required.
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