If an account owner wants to give a third party the legal authority to act on their behalf, they can grant a power of attorney (POA). You may also hear this called trading authorization. A POA allows someone other than the account owner(s) to take certain actions in the account. For the SIE exam, you’ll want to know the main types of POA and what each one permits. Limited POA allows the third party to perform transactions in the account. That means they can buy and sell securities on the account owner’s behalf, 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 can include a medical coma or mental incompetency. No matter the cause, a non-durable POA is revoked if the owner becomes incapacitated. A durable POA continues even if the account owner becomes incapacitated and remains in effect. A POA always ends if the account owner dies. At that point, the executor of the estate takes over responsibility for the assets. A POA can also be revoked at any time by the account owner.
Key points
Power of attorney (POA)
Allows a third party to act on behalf of account owner(s)
Referred to as trading authorization
Ceases at account owner’s death
Can be revoked at any time
Limited POA
Third party can place trades in the account
Third party cannot request withdrawals
Full POA
Third party can place trades
Third party can request withdrawals
Non-durable POA
Ceases at account owner incapacitation
Durable POA
Survives account owner incapacitation
If an account owner wants to give a third party the legal authority to act on their behalf, they can grant a power of attorney (POA). You may also hear this called trading authorization.