Margin Account Regulation and Requirements: Regulation T, FINRA Rules, and Initial/Maintenance Margin
Margin regulation operates on two layers, and questions frequently test whether you can keep them apart. Regulation T is a Federal Reserve Board rule governing the extension of credit by brokers and dealers. It sets the initial margin requirement at account opening and when new purchases are made: generally 50% of the purchase price for long marginable securities. FINRA rules (notably the maintenance rules in FINRA Rule 4210) govern the ongoing, post-purchase life of the account, including maintenance margin, margin calls, and payment deadlines. A common trap is applying the 50% initial requirement where the question is really asking about maintenance, or vice versa; read the timing carefully.
Key concepts: initial margin (Reg T, 50%); maintenance margin (FINRA, 25% for long equities in most cases, with higher requirements for certain concentrated or volatile positions); the distinction between marginable and non-marginable securities; and the special requirements for new accounts (Reg T's initial margin and the T+1 settlement/payment conventions). Another trap: the 25% maintenance figure is a floor, not a ceiling; brokers may and often do impose higher house requirements. Also remember that the 50% initial applies to the purchase price, while maintenance is measured against current market value, so a falling price can trigger a call even when the original deposit was adequate.
Worked rule of thumb: For a long purchase, initial equity required = 50% x purchase price; maintenance equity required = 25% x current market value. If equity falls below the maintenance requirement, a maintenance call is generated. If a customer sells before paying, the Reg T payment obligation still applies.