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:
“Give a man a free hand and he’ll try to put it all over you.”
—Raoul Walsh, U.S. screenwriter. Frisco Doll (Mae West)
“They’ll stone you when you’re riding in your car.
They’ll stone you when you’re playing your guitar.
Yes, but I would not feel so all alone,
Everybody must get stoned.”
—Bob Dylan [Robert Allen Zimmerman] (b. 1941)
“The urgent consideration of the public safety may undoubtedly authorise the violation of every positive law. How far that or any other consideration may operate to dissolve the natural obligations of humanity and justice, is a doctrine of which I still desire to remain ignorant.”
—Edward Gibbon (1737–1794)