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Official Practice ProblemFINRA Series 7 Blueprint: Function 3
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Question #2070Function 3Moderate

Shorting Low-Priced Stocks: Special Minimum Maintenance Rules under FINRA Rule 4210

A customer sells short 1,000 shares of a micro-cap equity currently trading at $3.00 per share ($3,000 total Short Market Value). What is the minimum required dollar deposit under FINRA Rule 4210's low-priced stock margin rules?

Correct Choice: A

For short stock under $5.00/share, the minimum maintenance requirement is the GREATER of $2.50 per share or 100% of market value. At $3.00/share, requirement is $3,000 (100%).

Complete Analysis & Legal Rationale

FINRA Rule 4210 has special minimum maintenance requirements for short sales of low-priced stocks to prevent speculative manipulation: (1) For stock selling at $5.00 per share and above, the requirement is the greater of $5.00 per share or 30% of market value; (2) For stock selling below $5.00 per share, the requirement is the greater of $2.50 per share or 100% of market value. For 1,000 shares at $3.00, 100% of market value ($3,000) is greater than $2.50/share ($2,500), so the deposit is $3,000.

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:

Choice ACorrect
None

For short stock under $5.00/share, the minimum maintenance requirement is the GREATER of $2.50 per share or 100% of market value. At $3.00/share, requirement is $3,000 (100%).

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 has special minimum maintenance requirements for short sales of low-priced stocks to prevent speculative manipulation: (1) For stock s

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

Verified citations governing Question #2070 (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 has special minimum maintenance requirements for short sales of low-priced stocks to prevent speculative manipulation: (1) For stock s

Read FINRA Official Rule
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