Position, Strategies, Trading Authority Flashcards
Long position
Bullish: Buy to open, sell to close
Short position
Bearish: Sell to open, buy to close
Short again the box
Investor borrows and sells short stock that she owns in order to delay the realization of a capital gain at a later time
Locate requirement
When a customer wants to enter a short sale, BD taking the trade must first locate the shares that will be borrowed for the short sale. Part of Regulation SHO.
Uncovered short
BD executes a short sale before locating the shares is in violation of Regulation SHO.
Solicited trade
A representative or communication from a BD introduces the purchase of a specific security to a customer
Unsolicited trade
Client places a trade not suggested by the BD or a representative.
Discretionary trade
Customer grants trading authority to a registered representative to places trades in the account without preauthorization from the customer. If an RR choose his own discretion on one or more of the three As, it is discretionary.
Three elements of a trade
Action (buy or sell)
The amount of a trade (shares or dollars)
Specific asset
Time and price authority
allowing the representative to choose the time or price at which a trade is executed is not considered discretion.
Authorizations required for discretionary trading
Client must agree in writing to grant a representative discretionary trading authority
Principal of the firm must approve in writing the discretionary trading authority
Wrap account
Accounts for which firms provide a group of services such as asset allocation, portfolio management, executions, and administration for a single fee. Generally advisory accounts. BD must meet fiduciary requirements under the Investment Advisers Act of 1940. Among the required disclosures is that the client may be able to get all the same services on a separate basis for less cost.
