FINRA Series 7Investment Information and Suitable RecommendationsMedium
A customer wants to purchase 200 shares of ABC stock at $60 per share in a margin account. Under Regulation T, what is the minimum initial margin deposit required?
- A$6,000
- B$4,500
- C$3,000
- D$12,000
Show answer & explanationAnswer & explanation
Correct answer: A. $6,000
Total purchase = 200 shares × $60 = $12,000. Regulation T requires a minimum initial margin of 50% of the purchase price, so the customer must deposit $12,000 × 0.50 = $6,000.
Why the other options are wrong
- B. Incorrect — this is 37.5% of the purchase price, not the correct percentage.
- C. Incorrect — this represents 25%, not the Reg T 50% requirement.
- D. Incorrect — this is the full purchase price, not the margin requirement.
Regulation T Initial Margin
Regulation T requires investors to deposit at least 50% of the purchase price of securities bought on margin in a margin account.
- Reg T initial margin requirement = 50%
- Applies to equity securities purchased on margin
- FINRA maintenance margin is 25% of market value
- Margin calls occur when equity falls below maintenance level
Memory trick: Reg T = 'put up half to trade.'