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Official Practice ProblemFINRA Series 7 Blueprint: Function 3
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Question #2062Function 3Moderate

Long Margin Account: 25% Minimum Maintenance Threshold & Margin Call Level

A customer purchases $40,000 of stock on margin, depositing the required 50% ($20,000) under Regulation T. The debit balance is $20,000. Under FINRA Rule 4210, to what market value can the stock decline before the customer receives a maintenance margin call?

Correct Choice: A

In a long margin account, maintenance call occurs when Equity < 25% of LMV. Market value trigger = Debit Balance / 0.75 = $20,000 / 0.75 = $26,666.67.

Complete Analysis & Legal Rationale

FINRA Rule 4210 mandates that equity in a long margin account must never fall below 25% of the Long Market Value (LMV). Since Equity = LMV - Debit Balance, the maintenance threshold is reached when LMV - Debit Balance = 0.25 × LMV. Rearranging algebraically: 0.75 × LMV = Debit Balance, so LMV = Debit Balance / 0.75. Here: $20,000 / 0.75 = $26,666.67. If LMV falls below $26,666.67, a maintenance call is issued.

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:

Choice ACorrect
None

In a long margin account, maintenance call occurs when Equity < 25% of LMV. Market value trigger = Debit Balance / 0.75 = $20,000 / 0.75 = $26,666.67.

Choice BIncorrect
Margin Principles Trap

Fails to adhere to margin rules for B.

Choice CIncorrect
Margin Principles Trap

Fails to adhere to margin rules for C.

Choice DIncorrect
Margin Principles Trap

Fails to adhere to margin rules for D.

Authorities & References:

Official Standard: FINRA Rule 4210 mandates that equity in a long margin account must never fall below 25% of the Long Market Value (LMV). Since Equity = LMV - Debit Bal

Official SourceFINRA FINRA Rule 4210 — Margin Account Rules
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Regulatory Authority & Citations: Primary Legal Sources

Verified citations governing Question #2062 (FINRA Series 7 Content Outline)

To pass the FINRA Series 7, candidates must understand not just the calculation formulas, but the exact federal securities acts, SRO rulebooks, and statutory frameworks that enforce them. Review the primary authority records below:

FINRAFINRA Rule 4210— Margin Account Rules

FINRA Rule 4210 mandates that equity in a long margin account must never fall below 25% of the Long Market Value (LMV). Since Equity = LMV - Debit Bal

Read FINRA Official Rule
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