Which governmental body primarily regulates credit for margin securities extended by broker-dealers?

The Federal Reserve Board (FRB) is the governmental body primarily responsible for regulating credit for margin securities extended by broker-dealers. This regulation is crucial to the functioning of the securities markets and is guided by the provisions of Regulation T, which establishes the parameters for margin trading, including how much of the purchase price can be financed through margin loans and how much must be provided by the investor.

The FRB’s involvement ensures that there are appropriate leverage limits to protect both investors and the financial system from excessive risk. By setting these margin requirements, the FRB helps to maintain stability in the financial markets, minimizing the risk of default that could arise from overly leveraged positions. This regulation is essential in ensuring that broker-dealers do not extend more credit than what is prudent relative to the financial assets involved.

While other bodies, such as the SEC, FINRA, and the CFTC, play important roles in the broader regulatory framework of the securities markets, they focus on different aspects. The SEC oversees the securities industry and protects investors, FINRA regulates broker-dealers and enforces its own rules, and the CFTC deals mainly with futures and options on commodities. Each has specific responsibilities, but when it comes to the regulation of credit for margin securities, the