Entity Accounts: Corporate Resolution, Charter, and Partnership Agreements
A registered representative meets with the Chief Financial Officer (CFO) of a mid-sized manufacturing corporation who wants to open a corporate brokerage account to trade equities and fixed-income securities on margin. Which specific document is required to prove who has authority to execute transactions on behalf of the corporation?
A Corporate Resolution specifies WHICH individuals are authorized to trade for the company. The Corporate Charter proves whether margin is permitted.
Complete Analysis & Legal Rationale
To open a corporate account, a broker-dealer requires: (1) A Corporate Resolution passed by the Board of Directors, which identifies by name and title the exact officers authorized to enter orders and trade on behalf of the entity; and (2) The Corporate Charter (Articles of Incorporation), which establishes that the company has the legal power to engage in securities trading and whether margin trading is permitted or prohibited. A personal power of attorney has no legal standing over corporate entity assets.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
The Corporate Resolution explicitly designates authorized trading officers and signers.
The Charter establishes legal corporate existence and purpose, but does not identify individual authorized traders.
Quarterly financial reports reflect financial status, not legal account authorization.
Personal powers of attorney apply only to individuals, not corporate entities.
Official Standard: Specifies documentation standards including corporate resolutions and organizational documents for institutional accounts.