Quick Answer
Three documents establish who may act on a customer's account: a power of attorney names the agent authorized for an individual's account, a trust instrument names the trustee authorized for a trust account, and a corporate resolution names the officers a corporation's board authorizes for a corporate account.
What Authority Does Each Account-Authorization Document Establish?
| Document | Establishes authority for | Names |
|---|---|---|
| Power of attorney (POA) | An individual customer's account | The agent the customer appoints to act on the account |
| Trust documents (trust instrument) | A trust account | The trustee with authority to act for the trust |
| Corporate resolution | A corporate account | The officers the corporation's board authorizes to transact on the account |
- A power of attorney (POA) is a document a customer signs to grant a named agent authority to act on the customer's account.
- Trust documents, or the trust instrument, establish a trust and identify its trustee, the person with authority to act for the trust's account. A firm's customer identification program accepts a trust instrument as one of the documents showing an entity exists.
- A corporate resolution is the document by which a corporation's board authorizes specific individuals to open and transact in an account on the corporation's behalf.
What Does the Rule Itself Require?
- The customer account information rule requires a firm to record, for a customer that is a corporation, partnership, or other legal entity, the names of any persons authorized to transact business on behalf of the entity.
- The rule requires the names. It does not name, define, or require any particular document. Power of attorney, trust instrument, and corporate resolution are the industry-practice paperwork firms use to obtain those names and evidence them, not terms a FINRA or SEC rule defines.
Exam Tip: Gotchas
- These three documents all answer the same know-your-customer question: who has authority to act for this customer. A power of attorney names an individual agent for a natural person's account, a trust instrument names a trustee, and a corporate resolution names authorized officers. Matching the wrong document to the wrong entity type is a common trap.
What Should You Check on Exam Day?
- Match the account type to its authorization document: individual to power of attorney, trust to trust instrument, corporation to corporate resolution.
- Confirm the document names the specific person or persons who may act, not merely that the account exists.
- Remember what the rule actually demands for an entity account: a record of the names of the persons authorized to transact, not a document with a particular title.
- Remember a trust instrument also works as a customer identification program document proving the trust exists.
- Watch for a fact pattern that swaps the officer-authorizing document with the agent-authorizing document.