Match each margin account regulation or rule under Federal Reserve Board (FRB) and FINRA g… — FINRA SIE (Securities Industry Essentials)

Match each margin account regulation or rule under Federal Reserve Board (FRB) and FINRA guidelines with its corresponding numerical threshold or legal limitation.

Regulation T initial equity deposit requirement for standard long equity purchases $50\%$ of the total purchase value
FINRA minimum initial equity requirement to open a margin positionThe lesser of $\$2,000$ or $100\%$ of the purchase price (or $\$2,000$ minimum for short sales)
Maximum amount of customer margin securities a broker-dealer may pledge to a bank (rehypothecate) $140\%$ of the customer's debit balance
FINRA minimum ongoing maintenance equity requirement for long margin positions $25\%$ of the current market value of the securities

Answer

Regulation T initial equity requirement matches

50\%

of purchase value; FINRA minimum initial equity requirement matches the lesser of

\$2,000

100\%

of purchase price; Maximum rehypothecation collateral limit matches

140\%

of the debit balance; FINRA long minimum maintenance requirement matches

25\%

of current market value.

Each regulatory requirement directly aligns with its specific quantitative limit established by the Federal Reserve Board and FINRA rules governing initial credit, rehypothecation limits, and ongoing account maintenance.

Step-by-Step Solution

Identify Regulation T initial margin rule

Regulation T sets the initial requirement for marginable stock purchases at

50\%

Federal Reserve Board governs extension of credit in securities transactions.

Identify FINRA Rule 4210 minimum initial requirement

FINRA mandates a minimum equity threshold of

\$2,000

100\%

of trade value for smaller long purchases.

Prevents over-leveraging on small retail margin transactions.

Identify rehypothecation limits under hypothecation agreements

Broker-dealers can repledge up to

140\%

of the customer debit balance.

Protects customer excess securities from improper firm re-hypothecation.

Identify ongoing maintenance requirements

FINRA sets the long maintenance margin threshold at

25\%

Ensures adequate equity buffer as market values fluctuate.

Key Concept

Margin Account Rules, Regulation T, and FINRA Minimum Equity Requirements

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Answer

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Key Concept

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