Long Margin Account Minimum Maintenance 25% Calculation
A customer has a long margin account with Long Market Value (LMV) of $40,000 and a Debit Balance (DR) of $32,000. Customer equity is currently $8,000. Under FINRA rules, what is the minimum maintenance requirement, and has a maintenance call occurred?
FINRA Rule 4210 requires minimum maintenance equity of 25% of LMV in a long margin account: 25% × $40,000 = $10,000. Because actual equity ($8,000) is below $10,000, a maintenance call of $2,000 is triggered.
Complete Analysis & Legal Rationale
LMV = $40,000, DR = $32,000, EQ = $8,000 (20% equity). Since 20% < 25%, the customer must deposit $2,000 cash (or $2,666.67 in marginable stock) to restore equity to 25% ($10,000).
Mathematical Step-by-Step Derivation
- Step 1: Current Equity = LMV ($40,000) - DR ($32,000) = $8,000.
- Step 2: FINRA Minimum Maintenance = 25% × $40,000 = $10,000.
- Step 3: Call Amount = Required Equity ($10,000) - Actual Equity ($8,000) = $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:
25% of $40k = $10,000; equity is $8,000; call is $2,000.
Minimum maintenance is 25%, not 20%.
30% applies to SHORT margin accounts, not long accounts.
50% is initial Reg T, not ongoing minimum maintenance.
Official Standard: Mandates 25% minimum maintenance equity on long securities positions.