Uniform Combined State Law (Series 66) Practice Exam

If a client fails to make payment for securities by the fifth business day after the settlement date, Regulation T mandates that the brokerage firm must take action to protect itself from potential losses due to non-payment. The correct action in this scenario is to freeze the account for a period of 90 days. This means that the client will not be able to make any new purchases on margin during this time, as a measure to mitigate risk associated with non-compliance with payment requirements.

This requirement under Regulation T emphasizes the importance of timely payments in brokerage operations and helps ensure that clients meet their financial obligations. The 90-day freeze gives firms the opportunity to assess the client’s payment habits and manage their financial exposure effectively.