FINRA Series 7Opens Accounts and Evaluates Customer ProfileHard
A new customer opens a margin account and wants to purchase 100 shares of XYZ stock at $15 per share. Under Regulation T and FINRA margin rules, what is the minimum amount the customer must deposit for this transaction?
- A$750
- B$1,500
- C$1,000
- D$2,000
Show answer & explanationAnswer & explanation
Correct answer: B. $1,500
The total purchase price is 100 shares × $15 = $1,500. Regulation T would normally require 50% ($750), but FINRA's minimum equity rule states the required margin cannot exceed the purchase price, and generally requires $2,000 minimum equity — capped at the purchase price if lower. Since $1,500 is less than $2,000, the customer must deposit the full $1,500 (i.e., pay for the stock in full).
Why the other options are wrong
- A. This is the Reg T 50% amount, but it is overridden by the rule capping the requirement at the purchase price.
- C. This figure does not correspond to any applicable margin calculation.
- D. The $2,000 minimum equity requirement is capped by the purchase price, so $2,000 is not required here.
Margin Minimum Deposit Rule
FINRA requires $2,000 minimum equity to open a margin account, but this requirement cannot exceed 100% of the purchase price of the securities.
- Reg T initial margin is normally 50%
- FINRA's $2,000 minimum is capped at the purchase price if lower
- Small purchases (below $2,000/50%) may effectively require full payment
Memory trick: $2,000 rule never asks for more than the sticker price.