Short Margin Account Minimum Maintenance 30% Calculation
A customer sells short 1,000 shares of stock at $30 per share. The Credit Balance is $45,000 ($30,000 sales proceeds + $15,000 Reg T deposit). If the Short Market Value (SMV) rises to $36,000, what is the customer's equity, and does a maintenance call occur?
Short margin equation: CR - SMV = EQ. CR = $45,000, SMV = $36,000 -> EQ = $45,000 - $36,000 = $9,000. FINRA short maintenance is 30% of SMV: 30% × $36,000 = $10,800. Since EQ ($9,000) < $10,800, a maintenance call of $1,800 is issued.
Complete Analysis & Legal Rationale
Short accounts face losses when market value rises. The credit balance stays fixed at $45,000. As SMV climbed from $30,000 to $36,000, equity dropped from $15,000 to $9,000 (25% equity), falling below the 30% FINRA floor.
Mathematical Step-by-Step Derivation
- Step 1: Equity = CR ($45,000) - SMV ($36,000) = $9,000.
- Step 2: 30% Minimum Maintenance = 30% × $36,000 = $10,800.
- Step 3: Maintenance Call = $10,800 - $9,000 = $1,800.
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:
Accurately calculates short equity ($9,000), 30% maintenance ($10,800), and $1,800 call.
Applies 25% long maintenance requirement instead of 30% short requirement.
Assumes equity is unchanged at $15,000, ignoring the $6,000 market rise loss.
Arithmetic calculation errors across equity and maintenance.
Official Standard: Mandates 30% minimum maintenance equity on short securities positions.