General Securities Sales Supervisor (Series10) Practice Exam

If a member firm increases its in-house minimum maintenance margin for long accounts, which statement is TRUE?

1. The firm can do so without giving customers prior written notice

2. The firm can only do so after giving customers 90 days advance notice of the change

3. The firm can only do so after filing the change with FINRA

4. The firm can only do so after filing the change with the FRB

The correct answer is: The firm can do so without giving customers prior written notice

When a member firm increases its in-house minimum maintenance margin for long accounts, it can do so without giving customers prior written notice. This is because a firm has the autonomy to establish its own margin requirements that exceed the minimum standards set by regulatory authorities like FINRA and the SEC. Although firms must comply with minimum margin levels established by regulators, they can implement stricter requirements as part of their internal policies without needing to notify the customers in advance. This flexibility allows firms to manage their risk and ensure that their customers maintain sufficient equity in their accounts. It's important to note that while firms can set higher requirements internally, they are still obligated to inform customers of their margin requirements, but this can be done at the time of the account opening or as part of periodic disclosures rather than requiring prior written notice for each adjustment. The other statements revolve around regulatory compliance and notification requirements which are not applicable in this context, specifically regarding formal filings with regulatory bodies or requiring advance notice for internal policy changes.