FINRA maintenance requirement long account
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Customers must keep 25% of market value in
account
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FINRA sets minimum maintenance requirements
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Reg T only sets amount needed for initial
purchase not balance that must be in account later
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Broker/dealer firms require 5-10% above FINRA to
protect themselves
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Maintenance margin call (MMC) =Dr/75%
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Minimum maintenance=MVx25%
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SMA=Equity – (LMV x 50%)
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Minimum Maintenance= LMV x 25%
Equity can decrease
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Debit balance increases
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Customer borrows $-use all/part SMA
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Market value decreases, stock price decreases
An investor has a long margin account with a market value of
$88,000 and a debit balance of $40,000. What is the FINRA minimum maintenance
for the account at its present position?
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$22,000
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25% present market value
·
88,000x25%=22k
| Reg T Call | Minimum Maintenance | Maintenance Call | |
| When maintenance call applies | when investors buy short/sell short | withdraw$ from long or short account,equity drop | long: bear, short:bull |
| Calculate long account | MVx50% | MVx25% | Dr/75% |
| Calculate short account | MVx50% | MVx30% | Cr/130% |
| minimum amount allowed in account | $2000-FINRA. Not The Fed's Reg T | Long: $2000 short:$2000 or $5 per share | N/A. need to deposit $ |
