Power of Attorney for stock brokerage transactions

On May 14, 7:06 am, Jay <jay6...@hotmail.com> wrote:
> A friend has given me a Power of Attorney to trade stocks in his
> brokerage account.

I can't imagine why any sensible person in your friend's shoes would do that, other than to give you power to SELL certain shares to convert them to cash if needed for liquidity while the Grantor of the POA was somehow incommunicado, or legally and mentally incapacitated.   Otherwise, if the Grantor is anyplace on the globe that offers satellite telephone service, including the Amazon jungles or the peaks of the Himalayas, you can communicate directly with him and follow his instructions as to what to buy or sell, and avoid the problem of applying your own investment decisions to the situation altogether.

> The text seems to be very standard (format
> prescribed by the broker) and doesn't say anything about my liability
> except that I must abide by all rules and regulations of the concerned
> regulatory bodies.

> Question: Is there any personal liability for me - though not stated
> explicitly, is there something that is always "understood" to be
> implied in a Power of Attorney?

The laws of each USA state are different, but yes, AFAIK they all impose certain "default" powers and obligations on the holder of a POA, which can be added to or changed if explicitly agreed to by the parties.   Check local law -- you don't say where you, or your friend, are.

> If I lose money, can my friend claim
> it from me

Maybe.   But probably not, if you act in good faith, with reasonable due diligence, and exercising ordinary sound business judgment.

If you sell all of your friend's valuable stocks to buy shares in the Brooklyn Bridge, yes you could be held liable.

> or can the broker or exchange claim it from me?

Probably not.   It's not their money, it's your friend's.  The brokers are just going to the market and putting through the transactions you ask them to make.  Unless I'm missing something obvious, why would the brokerage itself have a claim against _you_?   OTOH, if they fail to follow your reasonable instructions and as a result you suffer a loss, you (or your friend) might have a claim against _them_.   But you didn't ask that.

--
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Mike Jacobs
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