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Form ADV Part 1A Item 8C(2) · Answer type: yn · Item 8 - Brokerage Practices
Item 8C(2) asks whether the firm has discretionary authority to decide the amount of securities to buy or sell for a client's account: meaning the adviser can determine position sizes, trade quantities, and portfolio weightings without getting pre-approval from the client for each specific trade amount.
Discretionary authority over trade amounts means the adviser can decide to buy 100 shares versus 500 shares of a stock, allocate 5% versus 10% of a portfolio to a particular investment, or determine how much of a position to sell during rebalancing, all based on their professional judgment without consulting the client first.
This authority is essential for effective portfolio management because it allows advisers to implement their investment strategies precisely, respond to market conditions with appropriate position sizes, maintain target portfolio allocations, and rebalance efficiently as market values change.
An adviser who actively manages portfolios by adjusting position sizes based on market conditions and investment opportunities would mark Yes. An adviser who can only execute trades for predetermined amounts specified by clients would mark No.
Yes
The adviser has discretionary authority to determine trade amounts and position sizes for client accounts. This enables flexible portfolio management and efficient implementation of investment strategies without requiring client approval for each position sizing decision.
No
The adviser does not have discretionary authority over trade amounts. Either clients must pre-specify trade sizes, or the adviser operates under predetermined formulas or restrictions that limit their flexibility in sizing positions.
8C(2) - Amount of securities to be bought or sold for a client's account (Yes / No).
This checkbox is part of Item 8C, which covers different aspects of discretionary authority that advisers may have over client brokerage activities and trading decisions.
Discretionary authority over trade amounts gives advisers significant control over portfolio construction and risk levels. A Yes answer means you should understand how they determine appropriate position sizes and what controls guide their decisions.
When advisers have discretionary authority over amounts, they can optimize portfolio allocations, implement sophisticated strategies that require precise weightings, and adjust positions efficiently as market conditions change. However, it also means they can take larger or smaller positions than you might prefer, potentially affecting your risk exposure or strategy implementation.
A Yes does not tell you what criteria they use to determine position sizes, whether they have risk limits or concentration guidelines, how they balance different investments within your portfolio, or whether there are situations where they would consult with you before making large allocation changes.
Read the advisory agreement for the scope of quantity discretion, client concentration limits, and any trades that require prior approval. Compare those terms with the 8C(2) answer.
Yes
The adviser reports discretionary authority over trade amounts. Compare this with 8C(1) on the firm's Best Investors ADV panel: most comprehensive discretionary managers mark Yes on both security selection and amount authority. Also review 5F(2)(a) to see their total discretionary assets under management.
Check 5G services to understand their portfolio management approach, and examine 8A for any potential conflicts that might affect their position sizing decisions.
No
The adviser does not report discretionary authority over trade amounts. This might indicate a limited discretionary model or specific client restrictions. Compare with 8C(1) to understand their overall discretionary authority, and review 5F(2)(b) to see their non-discretionary asset levels.
Look at 5G services to understand whether they provide model portfolios, recommendations, or other advisory services that might constrain their position sizing flexibility.