Table of Contents
SERIES 7 | SERIES 65 | FINANCIAL REGULATION COURSES
FINRA Rule 4220 — Daily Record of Required Margin — requires every FINRA member firm that carries securities margin accounts for customers to make a record each day of every case in which initial or additional margin must be obtained in a customer's account pursuant to FINRA rules or Federal Reserve Board Regulation T — creating the daily documentation trail that enables member firms to monitor margin compliance, demonstrate regulatory adherence, and provide FINRA examiners with the detailed account-level margin activity records necessary to assess the adequacy of the firm's margin supervision programme.
Rule 4220 is the operational recordkeeping complement to FINRA Rule 4210's substantive margin requirements — where Rule 4210 establishes what margin must be maintained in customer accounts, Rule 4220 establishes the obligation to document each instance where the required margin must be obtained and how that requirement was fulfilled. Together the two rules create both the substantive framework and the evidentiary framework for margin compliance — Rule 4210 tells firms what margin to require, Rule 4220 tells firms how to record that they required it and how it was satisfied.
The rule was adopted as FINRA Rule 4220 from its predecessor Incorporated NYSE Rule 432(a) — consolidating the NYSE's daily margin recordkeeping requirements with the NASD's parallel requirements into a single uniform standard applicable to all FINRA member firms.
Rule 4220's core requirement is the daily record — each member firm carrying customer margin accounts must make a record every business day of every case in which initial or additional margin must be obtained in a customer's account.
The daily frequency is not a suggestion or a minimum that firms may exceed — it is a precise operational requirement that reflects the dynamic nature of margin account management. Margin requirements in customer accounts change daily as securities prices fluctuate — what was a compliant account at yesterday's close may require additional margin today if the securities held have declined in value. The daily record captures every instance where this dynamic has created a margin requirement that must be fulfilled — ensuring that the complete history of margin calls and their satisfaction or non-satisfaction is documented with the granularity needed for effective supervisory review.
The record must be made in the format that FINRA may require — giving FINRA the ability to standardise the format of margin records across the industry to facilitate examination review and comparative analysis. While FINRA has not mandated a single specific format for all firms the rule preserves FINRA's authority to impose format requirements as examination needs evolve.
Rule 4220 specifies precisely what information the daily margin record must contain — ensuring that the record is substantively complete rather than merely a confirmation that a margin call was issued.
For each account with a margin requirement the record must show the amount of margin required — the specific dollar amount of cash or securities that must be deposited to bring the account into compliance with the applicable margin standard. This amount must be calculated correctly under Rule 4210 and Regulation T — an inaccurate margin calculation that results in either an insufficient requirement or an excessive requirement would constitute a compliance failure regardless of whether the record itself was properly maintained.
The record must show the date when and the manner in which cash or securities were deposited or the margin requirements were otherwise complied with. This compliance documentation is the most operationally important component of the daily record — it demonstrates that each margin requirement was actually met, how it was met, and when. If a customer deposited cash to meet a margin call the record must show the date of the deposit and the amount. If securities were deposited in lieu of cash the record must identify the securities deposited and their value applied against the margin requirement. If the margin deficiency was resolved through the liquidation of account positions the record must reflect that outcome.
The phrase otherwise complied with accommodates the various mechanisms through which margin requirements can be satisfied — including the crediting of proceeds from securities sales to meet the margin requirement, the receipt of securities transferred from another account, or other means through which the account's equity is restored to the required level without the customer making a direct cash deposit.
Rule 4220 clarifies that individual entries in the firm's account management systems constitute the required record — the entries need not be combined and kept as a separate dedicated margin record separate from the firm's account management system.
This clarification reflects the practical reality of modern broker-dealer operations — member firms maintain sophisticated account management systems that record all account activity including margin calls, margin deposits, and margin-related liquidations as individual entries within the system. These system entries satisfy Rule 4220's recordkeeping requirement — the firm does not need to extract margin-related information from its account management system and compile it into a separate daily margin report, provided that the system entries capture all of the required information for each margin call and its resolution.
The flexibility in record format and compilation method does not reduce the substantive completeness requirement — the individual entries must collectively contain all of the information that Rule 4220 requires regardless of where in the firm's systems they are maintained. FINRA examiners reviewing a firm's margin recordkeeping compliance will assess whether the required information is accessible and complete rather than whether it is maintained in any particular format.
The daily margin record required by Rule 4220 serves a critical supervisory function within the member firm's margin compliance programme — enabling the supervisory personnel responsible for margin oversight to monitor the pattern of margin calls across the firm's customer account population and identify potential compliance concerns.
A pattern of repeated margin calls in the same customer account may indicate that the customer is consistently over-leveraged relative to the securities they hold — raising questions about whether the registered representative responsible for the account is recommending a portfolio that is appropriate for the customer's financial resources and risk tolerance under the suitability obligations of FINRA Rule 2111. A customer who regularly receives margin calls and repeatedly satisfies them only through the liquidation of account positions rather than by depositing additional capital may be experiencing systemic financial stress that raises investor protection concerns.
Conversely a pattern of margin calls that are consistently not met within the required timeframe — or that are satisfied in ways that suggest the customer is deliberately avoiding the consequences of margin deficiencies — may indicate compliance issues with the margin call satisfaction rules that require supervisory attention and potential escalation to FINRA examination staff.
The written supervisory procedures required by FINRA Rule 3110 must address the supervision of margin accounts — including the review of daily margin records to identify concerning patterns and ensure that margin calls are properly issued, tracked, and resolved. The daily margin record created by Rule 4220 is the primary documentary tool through which this supervisory review is conducted.
Rule 4220 connects directly to several other regulatory provisions that together constitute the complete margin compliance framework applicable to FINRA member firms.
Rule 4210 — described in detail in the FINRA Rule 4210 entry of this dictionary — establishes the substantive margin requirements that generate the margin calls Rule 4220 requires firms to document. The accuracy of the daily margin record depends on the accuracy of the margin calculations conducted under Rule 4210 — inaccurate margin calculations produce inaccurate records.
The customer protection requirements of Securities Exchange Act Rule 15c3-3 — which governs how broker-dealers handle and segregate customer funds and securities — interact with the margin framework by establishing the minimum reserve requirements that firms must maintain to protect customer assets. The daily margin records maintained under Rule 4220 contribute to the firm's ability to demonstrate compliance with these broader customer protection obligations.
The Margin Disclosure Statement required by FINRA Rule 2264 — which must be delivered to customers before or at the time of opening a margin account — informs customers about the mechanics of margin calls including the firm's right to liquidate securities without prior notice. The daily margin records document each instance where this right was exercised — creating the audit trail that supports the firm's position if a customer later disputes whether a margin call was properly issued or whether a liquidation was properly executed.
FINRA examiners regularly review member firms' daily margin records as part of the routine examination process — assessing both the completeness and accuracy of the records and the adequacy of the supervisory oversight that the records enable.
Key examination concerns in the margin recordkeeping area include the timeliness of margin call documentation — whether the daily record captures margin requirements as they arise rather than being created retroactively after the fact — the completeness of compliance documentation — whether the record shows how and when each margin requirement was satisfied — and the adequacy of supervisory review — whether the daily margin records are actually reviewed by supervisory personnel with the frequency and analytical depth required to identify compliance concerns.
Firms that maintain technically complete daily margin records but conduct no supervisory review of those records have satisfied Rule 4220's documentation requirement but may be failing Rule 3110's supervisory obligation — the records exist but serve no operational compliance function because no one is using them to monitor margin account activity for compliance concerns.
FINRA Rule 4220 is tested on the Series 7 examination in the context of margin account recordkeeping requirements and the documentation framework that supports margin compliance supervision.
The key points to retain are these.
FINRA Rule 4220 — Daily Record of Required Margin — requires every member firm carrying customer margin accounts to make a daily record of every case in which initial or additional margin must be obtained pursuant to FINRA rules or Regulation T. The record must show for each account the amount of margin required and the date when and manner in which cash or securities were deposited or the margin requirements were otherwise complied with — documenting both the requirement and its satisfaction or non-satisfaction.
Individual entries in the firm's account management systems constitute the required record — the entries need not be combined into a separate dedicated margin report provided the system entries capture all required information. The daily margin record serves a supervisory function within the firm's margin compliance programme — enabling review of margin call patterns, identification of concerning account behaviour, and demonstration of regulatory compliance during FINRA examinations. Rule 4220 operates as the operational recordkeeping complement to FINRA Rule 4210's substantive margin requirements — together they create both the framework for what margin to require and the evidentiary trail documenting that requirements were properly applied and fulfilled.
