Free Riding Violation
The Securities and Exchange Commission states "In a cash account, you must pay for the purchase of a stock before you can sell it. If you buy and sell a stock before paying for it, you are free riding, which violates the credit extension provisions of the Federal Reserve Board. If you free ride, your broker must freeze your account for 90 days."
If someone is trading rapidly and using all the cash available in the account to buy and sell, that person will likely get a "freeriding violation." Freeriding is subject to a mandatory 90-day cash-up-front restriction. Clients can still trade, but they lose the ability to make purchases with unsettled sale proceeds.
Read more about this topic: Free Riding
Famous quotes containing the words free, riding and/or violation:
“That’s free enterprise, friends: freedom to gamble, freedom to lose. And the great thing—the truly democratic thing about it—is that you don’t even have to be a player to lose.”
—Barbara Ehrenreich (b. 1941)
“Eunuchs ran through Hell and met
On every crowded street to stare
Upon great Juan riding by:
Even like these to rail and sweat
Staring upon his sinewy thigh.”
—William Butler Yeats (1865–1939)
“Injustice, cruelty, restraint of conscience, oppression, falsity, dishonour, deceit, violation of law and equity?—But look how they have cleaned up the cities and what wonderful roads they have built!”
—Johan Huizinga (1872–1945)