Regulation T (Reg T)

Understanding Regulation T

Regulation T (Reg T) is a Federal Reserve Board rule that limits how much credit a brokerage can extend to a customer for a securities purchase. The limit is 50%: whatever you buy, at least half of the purchase has to be funded by you at the time of the trade.

What a Reg T call means

A Reg T call means you bought securities without enough of your own money behind the purchase, and you need to make up the difference. If a purchase goes through and your equity covers less than half of it, you're in a Reg T call for the shortfall.

Unlike a maintenance call, a Reg T call is always caused by a trade. It's about how a purchase was funded, not about the performance of your portfolio.

On Frec, Reg T calls typically occur when you sell a stock and use the proceeds to buy a security with a lower or 0% LTV, while an outstanding loan remains unchanged.

How do I meet a Reg T call?

Deposit cash equal to the call amount and use the funds to repay a portion of your line of credit.

Selling positions counts as a strike

How much you need to sell depends on what you sell: a position with a 100% requirement frees a dollar of requirement per dollar sold, while ordinary stock frees only 50 cents. This resolves the call, but it records a strike against your account. Our clearing firm limits how often liquidations can be used to satisfy Reg T calls: three strikes in a rolling 12-month period restrict your account to closing trades only for 90 days. You'd still be able to sell or close existing positions, but you couldn't open new ones.

When a Reg T call is due

Reg T calls are due three business days from the trade date. A purchase made Monday creates a call due by Thursday. Our clearing firm reserves the right to require the call be met sooner.

What happens if you don't meet it

If a Reg T call isn't met by its deadline, positions in your account will be sold to resolve it. You don't choose what's sold, and sales may create taxable gains. That liquidation also counts as a strike under the three-strike limit above.