An institutional customer says the following to his broker: "Buy 100,000 shares of ABC stock whenever you think the time is best. This order is good unless I call you to cancel."
Which statement is TRUE about the handling of this order?

A. An executed power of attorney must be obtained from the customer prior to accepting the order
B. The order must be executed by the close of the market on that trading day
C. The order can be accepted as given, and can be executed at the discretion of the brokerage firm at any time or day
D. This order can only be accepted if the customer places it via fax or e-mail

Question

02-03-2020
Business

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An institutional customer says the following to his broker: "Buy 100,000 shares of ABC stock whenever you think the time is best. This order is good unless I call you to cancel."
Which statement is TRUE about the handling of this order?

A. An executed power of attorney must be obtained from the customer prior to accepting the order
B. The order must be executed by the close of the market on that trading day
C. The order can be accepted as given, and can be executed at the discretion of the brokerage firm at any time or day
D. This order can only be accepted if the customer places it via fax or e-mail

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letmeanswer letmeanswer · Answer 1 · 2020-03-09T09:43:55+01:00

" The order can be accepted as given, and can be executed at the discretion of the brokerage firm at any time or day " is TRUE about the handling of this order.

Explanation:

In this case "Discretion" applies to free trading when a broker conducts business in an user's account without any of the customer being contacted first.

It typically means that the broker will determine how many stock, commitments or other securities to purchase or sell, at what cost, without customer input.

For example, a consumer might approve only blue-chip investments. If an investor prefers socially responsible investments, the broker may not bet in stocks or under-funded businesses. The investor can advise the broker, but allow the broker to spend as the broker sees fit, to preserve a certain stock to bond ratio. A broker handling a discretionary account shall follow (if applicable) the customer's explicit orders and limitations.