Which of the following statements about Regulation T is correct?

Which of the following statements about Regulation T is correct?

• A. Regulation T is set by the SEC
• B. Regulation T is set by the FRB
• C. Regulation T is only applicable to mutual funds
• D. Regulation T is determined by state law

Answer: (B)

Regulation T is established by the Federal Reserve Board (FRB), which is responsible for formulating and regulating monetary policy. This regulation primarily governs the credit that can be extended by brokers and dealers to customers for the purchase of securities. It is important because it dictates the amount of margin that customers can use when buying securities on credit, thus influencing overall market operations and investor behavior. This regulation does not pertain just to a specific subset of financial products such as mutual funds, nor is it determined by state law or set by the Securities and Exchange Commission (SEC). Instead, it provides a broad framework for credit transactions in the securities market. Understanding Regulation T is crucial for grasping how margin requirements work and how they can affect trading practices.

Regulation T is established by the Federal Reserve Board (FRB), which is responsible for formulating and regulating monetary policy. This regulation primarily governs the credit that can be extended by brokers and dealers to customers for the purchase of securities. It is important because it dictates the amount of margin that customers can use when buying securities on credit, thus influencing overall market operations and investor behavior.

This regulation does not pertain just to a specific subset of financial products such as mutual funds, nor is it determined by state law or set by the Securities and Exchange Commission (SEC). Instead, it provides a broad framework for credit transactions in the securities market. Understanding Regulation T is crucial for grasping how margin requirements work and how they can affect trading practices.