Final answer:
Regulation T, which controls the extension of credit by broker-dealers for margin securities, is set by the Board of Governors of the Federal Reserve System (FRB). The correct option is (b).
Step-by-step explanation:
Regulation T, which governs credit for margin securities extended by the broker-dealer firm to their customers, is set by the Board of Governors of the Federal Reserve System (FRB).
This regulation is part of the broader framework in place to regulate and supervise the sale of securities and the entities that sell them.
Often, students of finance and Money and Banking courses delve into such topics, understanding the importance of maintaining bank solvency while avoiding excessive risk through a regulated approach, which includes various precautions such as reserve requirements, capital requirements, and restrictions on types of investments.
As referenced, the Federal Reserve Bank has regulatory power over financial markets and is crucial in establishing confidence within the banking system, as seen with the establishment of bodies like the Securities and Exchange Commission (SEC) which oversees Wall Street.
Therefore, when discussing the regulation of credit for margin securities, it is the Federal Reserve Board (FRB) that has authority, ensuring that banks adhere to responsible lending practices and risk management.