SIE (Securities Industry Essentials) Practice Exam

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Under Federal Reserve Regulation T, a 90-day restriction is imposed when a customer opens and closes which of the following positions?

The same stock in a cash account without paying for the stock in full
A futures contract without meeting the initial margin requirement
A long option position without exercising the option
A short sale without the intention to deliver the shares

The correct answer is: The same stock in a cash account without paying for the stock in full

When a customer opens and closes the same stock in a cash account without paying for the stock in full, it is known as a freeriding violation. This means that the customer has used the proceeds from the sale of a security to purchase another security without fully paying for it. This violates Federal Reserve Regulation T which requires customers to pay for securities in full. Options B, C, and D do not pertain to opening and closing a position in a cash account, so they are not affected by Regulation T. Additionally, option B mentions futures contracts which are not covered under Regulation T, but rather by margin requirements set by the commodity exchange. Option C mentions exercising an option which does not impact the opening and closing of a position, and Option D mentions a short sale without intention to deliver the shares which does not involve a cash account. Therefore, all other options are incorrect as they do not trigger a 90-day restriction under Regulation T.