TYPES OF ACCOUNTS


Individual Customer Account – an account in which are recorded all of the money transactions and futures trading activity of an individual customer. Documentation required to support such an account will usually include a New Account Information form, a Commodity Account Agreement form, a Risk Disclosure Statement and a Transfer of Funds Authorization. The last named form may not legally be required of a customer by the carrying firm, but most speculative customers will sign such a document when it is explained that, without it, each required transfer of the customer’s funds from his commodities account to any other type of account – for example, a securities account – will require his specific authorization in writing.

Joint Account (either as tenants in common or with rights of survivorship) – an account of two persons, who may or may not be related, who wish to trade in commodities in a joint venture. In a joint account with right of survivorship, if one of the joint account owners dies, the entire interest in the account immediately vests in the survivor, and the deceased’s estate has no further interest in the account. In a tenants-in-common account, without rights of survivorship, upon receiving written notice of the death of either of the joint owners, the carrying member firm is required to divide the account into equal parts, one under the name of the survivor and one under the name of the estate of the deceased. In addition to the documentation required of an individual customer, a joint account must be supported by a joint-account form, signed by both parties, on which the rights and obligations of each party to the account are set forth.

Partnership Account – the account of two or more individuals whose concerted operation in the business world is governed by a signed partnership agreement. Such an account may be for a closed partnership or for an open-end partnership, in which new partners may be added from time to time. To document such an account, all of the forms required of an individual Customer Account must be furnished, plus a copy of the partnership agreement and a partnership form that outlines, among other things, who among the partners is legally authorized to commit the partnership by giving orders, withdrawing funds and conducting other business for the partnership.

Corporate Account – the account of a customer for whom a state has granted a charter to do business as a corporation. Many hedging customers will be corporate accounts. When such an account is opened, the commission house normally will ask to see a copy of the customer’s corporate charter of Board resolution to satisfy itself that the corporation is legally empowered to trade in commodities. If the corporate charter includes the required trading authority, then the corporate customer will be asked to fill out and sign, as a minimum, a New Account Information Card, a Risk Disclosure Statement and a Corporate Account form. The last, among other things, names the officers of the corporation to whom its board of directors has delegated the authority to trade in commodities and give trade orders that will be legally binding on the corporation. As optional forms, the commission house also may suggest that the customer sign a Transfer of Funds Authorization and, depending on the reputability and financial standing of the corporation, a Commodity Account Agreement form.

Omnibus Account – an account of a commission house that clears its trading (house omnibus account) or that of its customers (customers’ omnibus account) through a carrying firm. The customer of the carrying firm is the “other” commission house, whose customers may remain unknown to the carrying firm.

Discretionary Account or Power of Attorney – an account over which the owner or owners have delegated either discretionary power to trade, or full power of attorney (including authority to withdraw funds as well as to trade) to another. If the person holding power of attorney is an employee of the commission house, such an account requires the commission house office manager’s approval of each order entered. Documentation required of such an account will include the forms required of an Individual Customer Account, plus a signed copy of the applicable power of attorney form. This form usually holds the commission house blameless for actions taken on the customer’s behalf by the person to whom power of attorney has been granted.

Custodial Account – e.g., “Sam Jones as Custodian for William Jones, a Minor, Under the Personal Property Laws of the State of …” Since a minor can, once he becomes of age, contest many of the acts taken on his behalf by a custodian while he was minor, most commission firms refuse to accept this type of commodity account.

Fiduciary or Trust Accounts – before opening a commodity account for such an entity, the commission house will wish to verify whether the fiduciary organization or trust is empowered by its indenture to trade in commodity futures and related option contracts. Not all are so empowered.

Investment Company Account – provides for trading by a number of investors who pool their resources into one fund for the specific purpose of trading in commodities. Power to trade is usually delegated to one or two participants in the fund or to an outsider. Special documentation to support such an account is required.