Match each first-time customer margin transaction scenario to its correct required initial… — FINRA SIE (Securities Industry Essentials)

Match each first-time customer margin transaction scenario to its correct required initial equity deposit under Regulation T and FINRA margin rules.

Long purchase of $1,500 of marginable common stock in a new account $1,500 deposit required (100% of the purchase price under FINRA rules for long purchases under$ 2,000)
Long purchase of $3,200 of marginable common stock in a new account $2,000 deposit required (FINRA minimum initial equity rule for long purchases between$ 2,000 and $4,000)
Short sale of $1,500 of marginable common stock in a new account$2,000 deposit required (FINRA minimum initial equity rule applying to all short sales regardless of trade size)
Long purchase of $12,000 of marginable common stock in a new account $6,000 deposit required (Standard 50% Regulation T requirement for long purchases exceeding$ 4,000)

Each transaction scenario matches its specific regulatory requirement: the

1,500 long purchase requires a 100% deposit (

1,500); the

3,200 long purchase requires the FINRA minimum deposit (

2,000); the

1,500 short sale requires the FINRA short sale minimum deposit (

2,000); and the

12,000 long purchase requires the standard 50% Regulation T deposit (

6,000).

Each match correctly applies the interplay between Regulation T (50% requirement) and FINRA minimum initial equity rules (

2,000 or 100% for long trades under

2,000). Long trades under

2,000 require a 100% deposit; long trades between

2,000 and

4,000 require

2,000; short sales under

4,000 require

2,000; and long trades over $4,000 require 50% under Regulation T.

Determine the initial margin rules under Regulation T and FINRA.

Regulation T mandates a 50% margin deposit for equity purchases. FINRA Rule 4210 requires a minimum initial equity of

2,000, except for long purchases under

2,000 where the requirement is 100% of the purchase price.

Initial margin deposits are dictated by whichever rule establishes the higher required dollar deposit.

Evaluate the long purchase of $1,500.

Since

1,500 is less than

2,000, the customer must deposit 100% of the purchase value ($1,500).

FINRA rules prevent leverage on small long purchases under $2,000 by requiring full payment.

Evaluate the long purchase of $3,200.

Reg T 50% of

3,200 is

1,600. However, FINRA mandates a $2,000 minimum equity deposit.

The FINRA

2,000 minimum overrides Reg T when 50% of the transaction is less than

2,000.

Evaluate the short sale of $1,500.

Short sales carry unlimited loss potential, so FINRA requires a minimum deposit of $2,000 regardless of how small the short transaction is.

The 100% rule for purchases under $2,000 applies strictly to long positions, not short positions.

Evaluate the long purchase of $12,000.

Reg T 50% of

12,000 is

6,000, which is higher than the $2,000 FINRA minimum equity requirement.

For transactions above

4,000, the standard 50% Reg T requirement is greater than the

2,000 minimum.

Regulation T (50%) and FINRA Initial Minimum Equity Requirements ($2,000 / 100% rule)

Question