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Question

Difficulty: EasyCustomer Account Types and Ownership Structures

When opening a corporate brokerage account, which document must a broker-dealer obtain to identify the specific individuals authorized to trade on behalf of the corporation?

  1. A corporate resolutionAnswer
  2. B
    A discretionary limited power of attorney signed by all shareholders
  3. C
    A trust agreement executed by the corporate officers
  4. D
    A joint account agreement listing all corporate officers as joint owners

Answer

A corporate resolution passed by the board of directors is required to open a corporate account and establish trading authority.
A corporate resolution adopted by the board of directors is mandatory when opening a corporate brokerage account. It confirms the corporation's authority to open the account and explicitly specifies the designated individuals who may place trades.

Step-by-Step Solution

1
Identify the entity type and required account documentation for legal entities.
A corporation is a legal entity distinct from its individual officers, employees, and shareholders.
Broker-dealers must verify official authorization from the governing body before accepting trade orders on behalf of an institution.
2
Determine the legal document created by a corporation's board of directors to grant authority.
The corporate resolution specifies which officers or employees have legal authority to place orders and act for the account.
This protects both the broker-dealer and the corporation from unauthorized transactions.

Key Concept

Corporate Brokerage Account Authorization Requirements
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Topics

Customer Account Types and Ownership Structures