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:
“No man hath any quarrel to me. My remembrance is very free and clear from any image of offence done to any man.”
—William Shakespeare (1564–1616)
“But the lightning which explodes and fashions planets, maker of planets and suns, is in him. On one side elemental order, sandstone and granite, rock-ledges, peat-bog, forest, sea and shore; and on the other part, thought, the spirit which composes and decomposes nature,—here they are, side by side, god and devil, mind and matter, king and conspirator, belt and spasm, riding peacefully together in the eye and brain of every man.”
—Ralph Waldo Emerson (1803–1882)
“There is all the difference in the world between the criminal’s avoiding the public eye and the civil disobedient’s taking the law into his own hands in open defiance. This distinction between an open violation of the law, performed in public, and a clandestine one is so glaringly obvious that it can be neglected only by prejudice or ill will.”
—Hannah Arendt (1906–1975)