FINRA $2,000 Minimum Initial Equity Requirement
An investor opens a new margin account and places an initial order to buy 100 shares of ABC stock at $30 per share ($3,000 total). Under Regulation T and FINRA rules, what is the required initial cash deposit?
While Reg T 50% of $3,000 would be $1,500, FINRA Rule 4210 mandates an initial minimum equity requirement of $2,000 on margin purchases between $2,000 and $4,000.
Complete Analysis & Legal Rationale
FINRA's $2,000 minimum equity rule overrides Reg T whenever 50% of the purchase is less than $2,000. Therefore, the customer must deposit $2,000 (creating $2,000 equity and a $1,000 debit balance).
Mathematical Step-by-Step Derivation
- Step 1: Purchase Value = $3,000.
- Step 2: Reg T 50% = $1,500.
- Step 3: FINRA Minimum Equity Rule = $2,000.
- Step 4: Customer must deposit the GREATER amount: $2,000.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Applies FINRA $2,000 minimum rule overriding Reg T $1,500.
$1,500 is Reg T 50%, but it violates the FINRA $2,000 minimum equity floor.
100% deposit ($3,000) is only required if total purchase is UNDER $2,000.
Understates required deposit.
Official Standard: Establishes $2,000 minimum initial equity for opening transactions.