A registered representative is opening a new cash brokerage account for a corporate client. The corporate officer submitting the paperwork provides the broker-dealer with the company's corporate charter and corporate resolution. Which of the following statements regarding the authorization and operational rules for this corporate account are correct?
- The corporate resolution must designate the specific officers or employees authorized to place orders for the account.Answer
- BUpon the death of an authorized corporate officer, the corporation's brokerage account assets must freeze and transfer to that officer's personal estate.
- The corporate charter must be examined to verify that trading securities is not explicitly restricted or prohibited by the entity's founding documents.Answer
- DFINRA rules require the broker-dealer to obtain a signed power of attorney from every individual corporate shareholder before executing trades.
Answer
The statements confirming that the corporate resolution must specify authorized traders and that the corporate charter must be verified to ensure securities trading is permitted are correct.
When opening a corporate brokerage account, the broker-dealer must obtain both the corporate charter and a corporate resolution. The corporate charter proves the legal existence of the entity and confirms that trading securities is consistent with the firm's charter restrictions. The corporate resolution, passed by the corporation's board of directors, explicitly designates which officers or employees possess trading authority on the account. Corporate assets belong to the corporation itself, so an authorized officer's death does not cause assets to transfer to personal estate probate, nor is individual shareholder power of attorney required.
Step-by-Step Solution
Key Concept
Corporate Account Documentation and Trading Authorization