The Financial Industry Regulatory Authority is drafting a proposal that would overhaul the two-decade-old “pattern day trading” rule, according to people familiar with the matter. The current regulation bars investors with less than $25,000 in their margin accounts from executing four or more day trades within five business days unless they post additional collateral. FINRA’s plan would lower that minimum equity requirement to about $2,000 and shift greater discretion to brokerage firms to set margin levels. The change would effectively lift the weekly three-trade cap for smaller accounts, allowing a broader swath of retail investors to buy and sell stocks and options more frequently. The proposal is still being finalized and would need approval from the U.S. Securities and Exchange Commission after a public-comment period. If adopted, it would represent the most significant relaxation of day-trading restrictions since the rule was introduced in 2001, underscoring regulators’ response to the surge in individual trading activity since the pandemic.