SIE Exam Practice Question 419
Question: 419
A client of yours purchased 1000 shares of RAL common stock on Monday, February 11th in a cash account at a CMV of $115 per share. The next day the stock moves to $128 on a very favorable news report and the client places an order to sell the 1000 shares at the market. On the Reg. T payment date the client has not paid for the purchase and asks that liquidation proceeds be used to cover the cost of the purchase.
Correct Answer: A
Explanation:
A: The purchase needs to be paid for in a timely way or the law does not consider the purchaser to be the 'owner' of the shares and entitled to any profit on them. Regulation T refers to the use of sale proceeds to pay for the purchase as 'free-riding.' It is not acceptable.
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