Securities Industry Essentials (SIE) ExamUnderstanding Trading, Customer Accounts, and Prohibited ActivitiesEasy
Which of the following is typically NOT considered a discretionary order?
- AAn order where the representative decides whether to buy or sell.
- BAn order where the representative decides the time of execution.
- CAn order where the representative decides the number of shares to buy or sell.
- DAn order where the representative decides the specific security to buy or sell.
Show answer & explanationAnswer & explanation
Correct answer: B. An order where the representative decides the time of execution.
A discretionary order is one where the registered representative decides at least one of the 'three A's': Asset (what security), Action (buy or sell), or Amount (number of shares). Deciding only the time or price of execution (time and price discretion) is considered a 'not held' order and is not a discretionary order, as it does not require a written power of attorney.
Why the other options are wrong
- A. Deciding 'whether' to buy or sell (Action) is discretionary.
- C. Deciding 'how many' to buy/sell (Amount) is discretionary.
- D. Deciding 'what' to buy/sell (Asset) is discretionary.
Discretionary Order
An order where the registered representative has the authority to decide at least one of the 'three A's': Asset, Action, or Amount. Requires written power of attorney from the client.
- Requires written Power of Attorney (POA).
- Covers 'Asset' (what), 'Action' (buy/sell), 'Amount' (how many).
- Time/price discretion ('not held' orders) are NOT discretionary.
- Must be approved by a principal.
Memory trick: Discretionary: it's the '3 A's' – 'A'sset, 'A'ction, 'A'mount.