An individual account is a type of trading account offered by brokers to day traders. Individual accounts are contrasted with a variety of alternative account types.
Individual Account Features
An individual account with a broker is one where only the named individual has access to the account, a right to trade using the account and a right to withdraw funds or perform any other clerical abilities tied to the account, such as transfers between sub-accounts.
The individual account arrangement is important for obvious security reasons, but also represents a legal limitation on the use of the individual account. For example, it is considered a breach of contract for anyone but the registered owner of the individual account to use the account for trading or investing.
This means that even if the individual account owner knowingly gives someone access to the account and permission to trade, the individual account owner would be in breach of their contract with the broker and open to consequences as defined in the contract.
Some brokers do allow for registered users to trade on behalf of an individual account owner with their permission, but they must first be approved by the broker using a similar set of restrictions placed upon all account holders.
Therefore, individual account owners should always be careful to read their contracts with their brokers to ensure that they are not operating in breach of the agreed rules and regulations.
Individual Account Vs Joint Account
The most common alternative to an individual account for day traders is a joint account.
A joint account shares most of the same features as an individual account, except that all registered joint owners of the account have the full powers of an individual account owner, to trade and withdraw funds for example, and the broker takes no responsibility for managing the internal affairs of the account holders.
This means that if there is some dispute between joint account holders, the broker takes no responsibility for any legal actions taken by any of the joint account owners.
Individual vs Corporate Account
The other common alternative to the individual account is the corporate or business account.
In this case the corporate account is generally structured differently from an individual account. The main account holder is a registered business, not an individual. Furthermore, there is a far more robust account system in place for controlling access to the various features of the account.
For example, many corporate accounts allow registered traders access to trading fixed funds in fixed asset areas, while they cannot withdraw funds, transfer funds between sub-accounts or trade outside of set assets classes and values.
The individual account is the standard offer from most brokers, and forms the basis of how all other accounts are structured.
The vast majority of day traders will be using individual accounts for their trading. However, some day traders may finds that they wish to upgrade to a corporate account once their day trading business reaches a certain size and complexity.