Failure to Meet Regulation T Call: T+4 Broker-Dealer Liquidation Obligation
A customer purchases $10,000 of stock in a margin account and fails to deposit the required $5,000 Regulation T margin call by the payment deadline (T+4 business days). No extension is granted by FINRA. What action is the broker-dealer required to take?
If a Reg T call is not met by T+4, the firm must sell out securities to satisfy the call and freeze the account for 90 days under Regulation T.
Complete Analysis & Legal Rationale
Under Federal Reserve Regulation T, customer payment for purchases must be deposited within two business days after regular-way settlement (T+1 + 2 = T+3 or T+4). If the customer fails to meet the call and no extension is obtained from the SRO (FINRA), the broker-dealer is required to promptly liquidate securities in the account sufficient to satisfy the call and freeze the account for 90 days (requiring cash upfront for future trades).
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:
If a Reg T call is not met by T+4, the firm must sell out securities to satisfy the call and freeze the account for 90 days under Regulation T.
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 Federal Reserve Regulation T, customer payment for purchases must be deposited within two business days after regular-way settlement (T+1 + 2 =