Definition of Regulation T

Regulation T regulates the extension of credit by broker dealers for securities purchases. The federal reserve board or FRB sets the terms of regulation T.

Applying "Regulation T" to Securities Exams:

The Securities Exchange Act of 1934 gave the authority to the Federal Reserve Board to regulate the extension of credit for securities purchases. Regulation T sets payment dates and initial margin requirement for securities purchases. An investor who purchases a security must pay for that trade 2 business days after the settlement date, or T+4. Regulation T also sets the initial margin requirements for investors who wish to borrow money to buy securities on margin. Regulation T requires that an investor deposit enough cash to cover 50% of the price of the securtiy.

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