SEC Alerts Investors to Day Trading Margin Rules

The SEC Office of Investor Education and Advocacy ("OIEA") provided guidance for investors concerning rules that apply to margin account day trading.

In an Investor Alert, the OIEA clarified, among other things, that:

• the FINRA definition of a "day trade" involves "the purchasing and selling or the selling and purchasing of the same security on the same day in a margin account," and exceptions to the definition include certain long and short security positions held overnight;

• a "pattern day trader" is a customer designated as such by a broker-dealer, who executes four or more day trades within five business days;

• a pattern day trader (i) must maintain a minimum of $25,000 in the trader's account and (ii) can trade up to four times the trader's maintenance margin excess; and

• a broker-dealer can implement higher minimum equity requirements, or limit day trading buying power to less than four times the day trader's maintenance margin excess.