Pattern Day Trader (PDT): Definition, $25,000 Minimum Equity, and PDT Calls
An investor executes four day trades (opening and closing the same equity position within the same business day) over a rolling 5-business-day period in a margin account. What is the investor's regulatory classification, and what is the minimum equity requirement under FINRA Rule 4210?
Executing 4 or more day trades within 5 business days designates the customer as a Pattern Day Trader (PDT), mandating $25,000 minimum equity before engaging in day trading.
Complete Analysis & Legal Rationale
Under FINRA Rule 4210(f)(8)(B), a customer who executes four or more day trades within five business days (provided the day trades constitute more than 6% of total trades) is classified as a 'Pattern Day Trader' (PDT). A PDT must maintain minimum equity of at least $25,000 on any day that day trading occurs. If equity drops below $25,000, day trading buying power is restricted, and failure to meet a PDT call results in cash-only trading for 90 days.
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:
Executing 4 or more day trades within 5 business days designates the customer as a Pattern Day Trader (PDT), mandating $25,000 minimum equity before engaging in day trading.
Fails to adhere to margin rules for B.
Fails to adhere to margin rules for C.
Fails to adhere to margin rules for D.
Official Standard: Under FINRA Rule 4210(f)(8)(B), a customer who executes four or more day trades within five business days (provided the day trades constitute more tha