Match each margin account transaction or holding scenario on the left with its correspondi… — FINRA SIE (Securities Industry Essentials)

Match each margin account transaction or holding scenario on the left with its corresponding initial deposit or minimum equity requirement under Regulation T and FINRA rules on the right.

An investor opens a margin account and purchases $6,000 of marginable equity securities as the initial trade.Initial margin deposit of $3,000 required (50% Regulation T requirement)
An investor opens a margin account and purchases $3,200 of marginable equity securities as the initial trade.Initial margin deposit of $2,000 required (FINRA minimum initial equity rule)
An investor opens a margin account and purchases $1,500 of marginable equity securities as the initial trade.Initial margin deposit of $1,500 required (100% of the total purchase price)
An investor maintains an established long stock position in an existing margin account.Ongoing minimum account equity of 25% of current market value required

Answer

The initial purchase of

6,000 requires a

3,000 deposit (50% Reg T). The initial purchase of

3,200 requires a

2,000 deposit (FINRA minimum equity floor). The initial purchase of

1,500 requires a

1,500 deposit (100% of purchase price for trades under $2,000). The established long position requires ongoing minimum maintenance equity of 25% of current market value.

Margin requirements combine Regulation T (50% initial margin) and FINRA Rule 4210 initial equity and maintenance thresholds. Purchases exceeding

4,000 require 50% deposit (

3,000 for a

6,000 trade). Purchases between

2,000 and

4,000 require a

2,000 flat deposit (

2,000 for a

3,200 trade). Purchases under

2,000 require 100% of the purchase price (

1,500 for a $1,500 trade). Long position ongoing minimum maintenance equity is 25%.

Step-by-Step Solution

Calculate the 50% Regulation T initial margin requirement for each long equity transaction.

6,000 trade → 50% =

3,000;

3,200 trade → 50% =

1,600;

1,500 trade → 50% =

750.

Regulation T establishes a baseline requirement that investors pay for at least 50% of marginable stock purchases.

Apply the FINRA minimum initial equity rule thresholds to initial transactions in new margin accounts.

For trades over

4,000 (

6,000 trade), Reg T of

3,000 applies. For trades between

2,000 and

4,000 (

3,200 trade), the FINRA

2,000 floor applies. For trades under

2,000 (

1,500 trade), 100% of the trade cost (

1,500) applies.

FINRA imposes a minimum equity rule requiring $2,000 or 100% of the purchase price, whichever is less, to prevent over-leveraging on small accounts.

Identify the minimum maintenance requirement for long equity positions after initial settlement.

FINRA Rule 4210 sets minimum maintenance equity for long positions at 25% of market value.

Maintenance requirements ensure the customer maintains sufficient collateral to cover price drops in margined securities.

Key Concept

Regulation T and FINRA Initial & Maintenance Margin Requirements

Question

Answer

Step-by-Step Solution

Key Concept

Common Mistakes

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