Which of the following verbal orders can be accepted from a customer without further documentation

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I’m an RN working in a family physician’s office. The other day, Dr. Smith asked me to write a new prescription for a client on her behalf because she was busy with another client. She instructed me to write the prescription and sign my name followed by, “as per Dr. Smith.” Can I do this?    

No, you cannot sign the prescription as the physician requested. Even if you write “as per Dr. Smith,” signing your name would mean you authorized the prescription. RNs and RPNs do not have the authority to do this.

Since Dr. Smith was physically present in the office to instruct you, the safest practice would be for her to personally write and sign the prescription. Then, you could either give the prescription to the client or fax it to the client’s pharmacy through a secure fax line.

Furthermore, Dr. Smith’s instruction is a verbal order which is not appropriate in this situation. Verbal orders are only allowed in emergency situations or when the prescriber is unable to document the order. (For more information on verbal orders, read the Authorizing Mechanisms practice standard.)

For more information, read the Decisions About Procedures and Authority practice standard.

What Is Discretionary Order?

A discretionary order is an order condition that gives a broker some latitude for its execution in terms of timing, price, and so on. A discretionary order may also be called a not-held order.

Key Takeaways

• Discretionary orders are those where a broker has some latitude in working the order on behalf of a client, without their express permission for each individual order decision or detail.
• Discretion most commonly accompanies conditional orders such as setting the limit price in response to changing market conditions.
• Discretionary orders are also a key component of discretionary investment management, whereby a broker or advisor trades on behalf of a client without getting their input on every action.
• Discretionary orders relieve the broker from responsibility for potential losses that their client may suffer, so long as they are using their discretion with the aim of best execution.

Understanding Discretionary Order

More broadly, a discretionary order is one where a broker or other financial markets professional can place and work an order without explicit acknowledgment from the customer. These orders can broaden the specification of standard types of conditional orders to give an order a higher likelihood of execution. Additionally, discretionary orders help to improve the chances of order execution while still also allowing the investor to place certain conditional constraints.

Standard types of conditional orders can include an additional discretionary component. The discretionary component is commonly added to limit orders and stop loss orders. This component is a basic order provision that allows the investor to include a discretionary amount with their order. Thus, if a broker is a given a limit order with discretion, the broker may choose to change the limit price in response to market activity and liquidity when the order is received.

Discretionary orders can be placed through electronic trading systems or with a broker. In either case, the investor specifies with a broker-dealer a conditional order with a discretionary amount. The discretionary amount is typically quoted in cents and gives the order some additional latitude for being executed beyond the standard conditions. These orders are viewed as special orders by broker-dealers who monitor them for submission. Broker-dealers will seek to submit orders based on the best price for the customer.

Discretionary orders are subject to broker-dealer allowances. If offered they can usually be added to all types of orders. In some cases, an investor may add a discretionary amount to a single-day order. Discretionary amounts can also be added to good 'til canceled (GTC) orders which remain open indefinitely unless canceled by the investor.

Discretionary Order Examples

Many investors choose to add a discretionary amount to standard buy and sell limit orders. Limit orders are the most basic type of conditional order allowing an investor to choose a specified price for which they seek to buy or sell a security. Buy limit order prices will be below the market price and sell limit orders are above the market price.

In a discretionary buy limit order, an investor would specify a below-market price for execution. This investor would also specify a discretionary amount either through their trading system or with their broker directly. If an investor placed a buy limit order of $20 on a stock currently priced at $22 with a 10 cent discretionary amount, then it means they seek to buy the security at $20 but would permit a buy order price of $20 to $20.10. If the price falls to $20.10, this order would be submitted and executed for the investor.

In a discretionary sell limit order, an investor would specify an above-market price for execution. This investor would also specify a discretionary amount with their order. If an investor places a sell order at $24 on a stock currently trading at $22 with a 10 cent discretionary amount, then the order could be submitted and executed at a selling price of $23.90 or higher.

Discretionary Investment Management

Discretionary investment management is a form of investment management in which buy and sell decisions are made by a portfolio manager or investment counselor for the client's account. The term "discretionary" refers to the fact that investment decisions are made at the portfolio manager's discretion. This means that the client must have the utmost trust in the investment manager's capabilities.

Discretionary investment management can only be offered by individuals who have extensive experience in the investment industry and advanced educational credentials. Discretionary investment management is generally only offered to high-net-worth clients who have a significant level of investable assets.

These clients must maintain a discretionary account—an investment account that allows an authorized broker to buy and sell securities without the client's consent for each trade. They must also sign a discretionary disclosure with the broker as documentation of the client's consent. A discretionary account is sometimes referred to as a managed account; many brokerage houses require client minimums (such as $250,000) to be eligible for this service, and usually charge between 1% and 2% a year of assets under management (AUM) in fees.

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