Customer Accounts

Question 1

3 Step Suitability Determination

Answer 1

Step 1: Reasonable Basis Suitability
Step 2: Customer-Specific Suitability
Step 3: Quantitative Suitability

Question 2

Initial Margins Set by Reg. T

Answer 2

Stocks and convertibles:
Long Position– 50%
Short Position– 50%

• Deposit requirement is based on the “net purchase” for that day.
• Minimum margin to open a long account = $2000 (does not apply to “fully paid” securities)
• Minimum margin to open a short account = $2000
• Minimum for day trading accounts = $25,000

Question 3

Cheap Stock Rule

Answer 3

Minimum margin to short a stock under $5 is the greater of 100% of the sale amount or $2.50 per share. Versus the minimum margin to short a stock valued at $5 a share or more is $5 per share or 30% of the sale amount, whichever is greater.

Question 4

FINRA Minimum Maintenance Margin

Answer 4

Stocks and convertibles:
Long Position– 25%
Short Position–30%