Power of attorney

If an account owner wants to provide a third party the power to act on their behalf, they can obtain a power of attorney (POA). Sometimes referred to as trading authorization, POA allows someone other than the account owner(s) to take action in accounts. In this section, we’ll discuss different types of POAs*, which need to be known for the Series 7 exam.

*FYI - POA is not an account registration; it’s an added account feature.

Limited POA allows the third party to only perform transactions on the account. The third party can buy and sell securities on behalf of the account owner, but cannot request withdrawals from the account. Full POA allows the third party to buy and sell securities as well as request withdrawals.

If the POA is non-durable, it ceases to exist if the account owner becomes incapacitated. Incapacitation includes medical comas or mental incompetency. Regardless of the reason, a non-durable POA is revoked if this occurs. Durable POA survives incapacitation and will remain in effect.

POA always ceases to exist if the account owner were to pass away. At that point, the executor of the estate would take over their assets. Also, POA can be revoked at any time by the account owner.