FINRA Series 7Processes and Confirms TransactionsMedium
A customer purchases stock in a margin account on Monday (trade date); the trade settles T+1 on Tuesday. The customer cannot pay in full, and the firm requests and receives a Regulation T extension of two additional business days. By which day must the customer make full payment?
- AWednesday
- BFriday
- CThursday
- DThe following Monday
Show answer & explanationAnswer & explanation
Correct answer: C. Thursday
Under Reg T, payment is due by the settlement date (Tuesday, T+1). A firm may request one extension of two additional business days: Tuesday + 2 business days = Thursday.
Why the other options are wrong
- A. Wednesday is only one business day after settlement, not the full extension.
- B. Friday would be three business days past settlement, beyond the allowed extension.
- D. Extensions are measured in business days, not calendar weeks.
Regulation T Payment Extension
Reg T requires full payment by settlement date; a broker-dealer may request one extension of up to two additional business days through an SRO before liquidating the position (freeze) or reporting a violation.
- Payment normally due at settlement (T+1)
- One extension of 2 business days is generally allowed
- Failure to pay leads to a frozen account
Memory trick: Settle, then two more days grace — miss it, and the account gets frozen.