Margin Accounts
A customer's long margin account shows: LMV = $50,000, DR = $20,000. What is the customer's SMA?
SMA = Equity - (50% x LMV). First, calculate equity: $50,000 - $20,000 = $30,000. Then: SMA = $30,000 - (50% x $50,000) = $30,000 - $25,000 = $5,000. This $5,000 represents excess equity above Reg T requirements.
Complete Analysis & Legal Rationale
SMA = Equity - (50% x LMV). First, calculate equity: $50,000 - $20,000 = $30,000. Then: SMA = $30,000 - (50% x $50,000) = $30,000 - $25,000 = $5,000. This $5,000 represents excess equity above Reg T requirements.
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:
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Federal Reserve Regulation T margin/credit rules for broker-dealers (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.