SIDE BAR: NASD Conduct Rule 2510: Discretionary Accounts
(a) Excessive TransactionsNo member shall effect with or for any customer's account in respect to which such member or his agent or employee is vested with any discretionary power any transactions of purchase or sale which are excessive in size or frequency in view of the financial resources and character of such account.(b) Authorization and Acceptance of AccountNo member or registered representative shall exercise any discretionary power in a customer's account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member, in accordance with Rule 3010.(c) Approval and Review of TransactionsThe member or the person duly designated shall approve promptly in writing each discretionary order entered and shall review all discretionary accounts at frequent intervals in order to detect and prevent transactions which are excessive in size or frequency in view of the financial resources and character of the account.(d) ExceptionsThis Rule shall not apply to:(1) discretion as to the price at which or the time when an order given by a customer for the purchase or sale of a definite amount of a specified security shall be executed, except that the authority to exercise time and price discretion will be considered to be in effect only until the end of the business day on which the customer granted such discretion, absent a specific, written contrary indication signed and dated by the customer. This limitation shall not apply to time and price discretion exercised in an institutional account, as defined in Rule 3110(c)(4), pursuant to valid Good-Till-Cancelled instructions issued on a "not-held" basis. Any exercise of time and price discretion must be reflected on the order ticket;(2) bulk exchanges at net asset value of money market mutual funds ("funds") utilizing negative response letters provided:
(A) The bulk exchange is limited to situations involving mergers and acquisitions of funds, changes of clearing members and exchanges of funds used in sweep accounts;(B) The negative response letter contains a tabular comparison of the nature and amount of the fees charged by each fund;(C) The negative response letter contains a comparative description of the investment objectives of each fund and a prospectus of the fund to be purchased; and(D) The negative response feature will not be activated until at least 30 days after the date on which the letter was mailed.
Wells Fargo maintained policies and procedures that prohibited representatives from exercising discretionary power in placing an order for the purchase or sale of securities for a client, except in designated approved accounts where the client provided prior written approval to do so.
Do you have accounts for which you exercise discretion over trading activity?
Use of discretion in non-discretionary accounts.
Historic Federal Reserve Restrictions On Wells Fargo (BrokeAndBroker.com Blog, February 5, 2018) http://www.brokeandbroker.com/3808/federal-reserve-wells-fargo/ Just by way of a brief trip down Memory Lane, recall this:Responding to widespread consumer abuses and compliance breakdowns by Wells Fargo, Federal Reserve restricts Wells' growth until firm improves governance and controls. Concurrent with Fed action, Wells to replace three directors by April, one by year end(Board of Governors of the Federal Reserve System Press Release, February 02, 2018)https://www.federalreserve.gov/newsevents/pressreleases/
enforcement20180202a.htmSecurities Industry Commentator feed:
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