Regulation T (Reg T)

Regulation T, usually shortened to Reg T, is a Federal Reserve Board regulation that controls the extension of credit from broker-dealers to their customers. It has two main jobs: it sets the initial deposit required when securities are purchased on margin, and it sets the deadline by which customers must pay for their trades.

The headline number is the 50% initial margin requirement. When a customer buys marginable securities in a margin account, they must deposit at least half of the purchase price; the broker-dealer can lend the rest. Buy $20,000 of stock, and Reg T requires a $10,000 deposit. The same 50% requirement applies to short sales. A Reg T call can also be met by depositing fully paid marginable securities instead of cash — because securities only have 50% loan value, the deposit must be worth twice the cash call.

Reg T also governs payment in all account types, including cash accounts. Customers must pay for purchases within a set window after the settlement date; if payment isn't made and no extension is granted, the firm must sell out the position and freeze the account for 90 days, requiring cash up front for future purchases. Note that Reg T covers only initial requirements — ongoing minimums are set by FINRA's maintenance margin rules, and not all securities are Reg T marginable (new issues, for example, generally can't be purchased on margin for 30 days).

Reg T is core material on the SIE exam's margin account section and gets more advanced treatment on the Series 7, where it interacts with the special memorandum account (SMA), excess equity, and restricted accounts.