Power Of Attorney

Ottavia Sorensen, 79, wants documents in place in case she can no longer manage her own affairs. Her adviser should explain that a DURABLE power of attorney for property:

1. A.Authorizes an agent to make her medical and end-of-life decisionsThat requires a health care proxy or medical power of attorney, a separate document.
2. B.Continues to operate after her death so that her agent can settle the estateAll powers of attorney terminate at death. The executor named in the will, or a court-appointed administrator, settles the estate.
3. C.Transfers legal title to her assets into the name of the agentThe agent gains authority to act, not ownership. Retitling assets is what funding a revocable trust does.
4. D.Authorizes an agent she names to handle her financial affairs and, unlike an ordinary power of attorney, remains effective after she becomes incapacitated, terminating at her death when the executor takes overCorrect. Durability addresses incapacity, and the document dies with the principal.

Why: A power of attorney appoints an agent to act on the principal behalf. An ordinary power of attorney lapses when the principal becomes incapacitated, which is precisely when it is most needed; a DURABLE power of attorney is written to survive that incapacity. It authorizes financial acts only. Health care decisions require a separate health care proxy or medical power of attorney, and every power of attorney terminates at the principal death, when authority passes to the executor named in the will.

Aurelia Fitzsimon signs a limited trading authorization naming her nephew Piers on her brokerage account. Three weeks later Piers telephones the agent and asks that $30,000 be wired from the account to his own personal bank account, explaining that his aunt is content for him to manage the money as he sees fit. The agent should:

1. A.process the wire, because a trading authorization gives the named person the same powers over the account as the ownerA trading authorization confers trading power only, not the powers of ownership.
2. B.process the wire if Piers confirms his instruction in writingA writing from the authorised person cannot enlarge the authority the owner granted.
3. C.decline the wire, because a limited trading authorization permits trading but not the withdrawal of assets, still less a transfer to the authorised personCorrect. Disbursing account assets to a third party requires authority the owner never gave.
4. D.decline the wire unless the amount is reduced to a level consistent with the account's recent trading activityThe obstacle is the absence of authority, not the size of the request.

Why: A limited trading authorization empowers the named person to buy and sell securities in the account. It does NOT authorise the removal of cash or securities from the account, and it certainly does not authorise a transfer to the authorised person's own name. Moving assets out to a third party requires a full power of attorney or specific written instructions from the account owner, and a request to send account assets to the person holding the trading authority is also a serious red flag for exploitation. The correct step is to refuse the wire and go back to the account owner.

A customer telephones Wexler Securities and asks the firm to sell 40,000 dollars of securities and wire the proceeds to an account at another institution held in the name of her business partner. Before Wexler may send the funds, it must:

1. A.Obtain the business partner's written consent to receive the funds.Wrong. The authorization that matters comes from the account owner, not from the recipient.
2. B.Refuse the request, because a broker-dealer may never disburse customer funds to a third party.Wrong. Third-party disbursements are permitted with proper authorization; they are controlled, not prohibited.
3. C.Obtain nothing further, since a customer is free to direct the disposition of her own money by telephone.Wrong. Telephoned third-party wire instructions are the classic account takeover pattern, which is why written authorization and verification are required.
4. D.Obtain the customer's written authorization for the third-party disbursement and independently verify that the instruction came from her.Correct. Written authorization plus verification is the standard control for moving assets to someone other than the account owner.

Why: Disbursing customer assets to someone other than the customer is a third-party disbursement, and firms require written authorization from the customer identifying the destination, together with verification that the instruction genuinely came from her. Firms typically verify by independent call-back to a number of record or by comparing a signature, precisely because emailed and telephoned wire instructions are the standard vector for account takeover fraud. The request is also an anti-money-laundering consideration, since moving assets to an unrelated party's account can be a layering technique.

Drayton Securities is opening an account for Verrick Holdings, a closely held corporation. The treasurer states that in addition to buying and selling securities for cash, the company wants to write options and purchase on margin. Beyond ordinary customer identification, what documentation does the firm need?

1. A.A certified corporate resolution naming the persons authorized to trade, plus the corporate charter and bylaws to confirm the corporation is empowered to trade options and to borrow on margin.Correct. The resolution establishes agency; the charter and bylaws establish corporate power to engage in margin and options activity.
2. B.Only a corporate resolution; charter and bylaws are needed for partnership accounts, not corporate ones.Wrong. It is precisely the corporate charter and bylaws that must be reviewed for margin and options authority.
3. C.A signed personal guarantee from each corporate officer covering the account's obligations.Wrong. No rule requires officers to guarantee a corporate account personally.
4. D.Nothing beyond the information the customer identification program requires for a legal entity customer.Wrong. Identification rules verify who the customer is; they say nothing about who may trade or what the entity is empowered to do.

Why: A corporation acts only through authorized agents, so the firm needs a certified corporate resolution identifying the officers empowered to trade and specifying the scope of their authority. Margin and options add a second layer: many corporate charters and bylaws restrict or prohibit borrowing and derivatives activity, so the firm must review the charter and bylaws to confirm the corporation itself is permitted to engage in them. A partnership account presents the analogous question through the partnership agreement.