Definition of Discretionary account

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TeachMeFinance.com - explain Discretionary account




historic definition...

Discretionary account -- In speculation (as in stocks ) a discretionary account is an account the handling of which is entrusted to the broker with whom it is opened. Sometimes fraud is practised by a dishonest broker in handling a discretionary account. Such a broker will retain profit for himself while charging loss to the customer. One way in which a broker may practise fraud while imparting a semblance of honesty and regularity to an operation is to make an actual purchase and simultaneously make an actual sale; then, after there has been a change (an advance, or a decline) in the price, make another actual purchase and simultaneously an actual sale. The difference between the price at which the first transactions are made and the price at which the second transactions are made the broker may deduct from the amount deposited with him as margin by the customer and keep for himself while reporting it to the customer as a loss sustained. The broker is in a position to show by others with whom he dealt that actual transactions were made, but need not reveal such of the transactions as would disclose sales offsetting the purchases and purchases offsetting the sales, by which one transaction voided another, with the result that, as a fact, no stock was really at* any time carried (held) by the broker.



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Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".


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