Good Faith and Free Riding
The main difference between a good faith violation and free riding is the eventual deposit of funds to cover the buy. In free riding the buyer sells the security without ever depositing the funds to pay for the initial purchase.
The Federal Reserve considers a good faith violation an "abuse of credit" and requires the broker keep track of them. If the trader gets three violations in one year, the broker is required to restrict the account. This is compared to the free riding violation which results in an automatic restriction.
Read more about this topic: Free Riding
Famous quotes containing the words faith, free and/or riding:
“There comes a time in the affairs of men when they must prepare to defend not their homes alone but the tenets of faith and humanity on which their churches, their governments and their very foundations are set. The defense of religion, of democracy and of good faith among nations is all the same fight. To save one, we must now make up our minds to save all.”
—Franklin D. Roosevelt (1882–1945)
“We said there warn’t no home like a raft, after all. Other places do seem so cramped up and smothery, but a raft don’t. You feel mighty free and easy and comfortable on a raft.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)
“But, after the war was over, just think what came to pass—
A letter, sir; and the two were safe back in the old Bluegrass.
The lad had got across the border, riding Kentucky Belle;
And Kentuck she was thriving, and fat, and hearty, and well;
He cared for her, and kept her, nor touched her with whip or spur:
Ah! we’ve had many horses, but never a horse like her!”
—Constance Fenimore Woolson (1840–1894)