If an account owner wants to give a third party the authority to act on their behalf, they can grant a power of attorney (POA). POA is sometimes called trading authorization because it allows someone other than the account owner(s) to take action in the account. For the Series 7 exam, you’ll want to know the main types of POA.
FYI: POA is not an account registration. It’s an added account feature.
Limited POA allows the third party to perform transactions in the account. They can buy and sell securities on behalf of the account owner, but they can’t request withdrawals from the account. Full POA allows the third party to buy and sell securities and request withdrawals.
If the POA is non-durable, it ends if the account owner becomes incapacitated. Incapacitation includes situations such as a medical coma or mental incompetency. No matter the cause, a non-durable POA is revoked if incapacitation occurs. A durable POA survives incapacitation and remains in effect.
POA always ends if the account owner dies. At that point, the executor of the estate takes over the assets. POA can also be revoked at any time by the account owner.
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