An investor opening a new margin account executes an initial long purchase of 100 shares o… — FINRA SIE (Securities Industry Essentials)

An investor opening a new margin account executes an initial long purchase of 100 shares of XYZ stock at $15 per share. Under Regulation T and FINRA margin rules, what is the minimum dollar equity deposit required from the investor for this transaction?

Answer: 1500 USD

Answer

The minimum required equity deposit is $1,500.

Under Regulation T, the standard initial margin requirement is 50% (

750). However, FINRA rules require a customer to deposit a minimum initial equity of

2,000 or 100% of the purchase price, whichever is less. Since the total purchase price is

1,500, which is less than

2,000, the customer must deposit 100% of the purchase price, or $1,500.

Step-by-Step Solution

Determine total transaction value

1,500 (100 shares ×

15)

Margin requirements are based on the aggregate purchase price.

Compare Regulation T and FINRA minimum initial deposit rules

Deposit required is $1,500

Regulation T requires 50% (

750), but FINRA Rule 4210 mandates an initial minimum equity deposit of

2,000 or 100% of the purchase price, whichever is less. Since

1,500 is less than

2,000, the investor must deposit 100% of the purchase amount.

Key Concept

FINRA Initial Margin Minimum Deposit Rule for Small Purchases

Question

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

Topics