FINRA Updates Interpretations on Minimum Equity Requirements for Margin Accounts

FINRA clarified interpretations of FINRA Rule 4210(b) ("Initial Margin") regarding minimum equity requirements in a customer's margin account.

The guidance is kept on a FINRA webpage, Interpretations of FINRA’s Margin Rule, which tracks the rule section by section.

In the update, FINRA replaced Interpretation /02 with the following modified interpretations:

  • /021 Minimum Equity, which clarifies the exceptions to the $2,000 minimum equity requirement, including in an instance of full cash payment or of securities transactions resulting in positions covered by Rule 4210(e)(2)(F), (G) or (H);

  • /022 Effect of Market Value Decline below $2,000 Equity, which states that no deposit or liquidation is necessary if the equity falls below $2,000 because of a decline in the market value;

  • /023 Withdrawals below $2,000 Equity, which clarifies when withdrawals are permissible;

  • /024 Minimum Equity - Cash Account, which establishes the minimum equity requirement in a cash account; and

  • /025 Minimum Equity - Pattern Day Traders, which clarifies that pattern day traders are subject to a $25,000 minimum equity requirement.

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