Discretionary Accounts
Accounts where the customer gives written authorization (power of attorney) for the rep to choose the asset, the action (buy/sell), or the amount without contacting the customer first; a principal must accept the account and review its activity.
Every discretionary order must be marked as such, and a designated principal must approve the account and monitor for excessive trading. Discretion abused for commissions becomes churning — the linked violation the exam pairs with this topic.