SIE (Securities Industry Essentials) Practice Exam

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Which of the following is NOT marginable under Regulation T of the Securities & Exchange Act of 1934?

Common stocks
Bonds
Options
Mutual Funds

The correct answer is: Options

Margin refers to borrowing money from a broker to purchase securities. Regulation T, established by the Securities & Exchange Act of 1934, sets a limit on the amount of credit that can be extended for margin transactions. This regulation applies to various types of securities, including common stocks, bonds, and mutual funds. However, options are not marginable, meaning that they cannot be purchased using borrowed funds. This is because options carry a higher level of risk compared to other securities and borrowing money to purchase them could lead to significant losses for the investor. Therefore, options are not allowed to be marginable under Regulation T.