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:
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“A distinction of property results from that very protection which a free Government gives to unequal faculties of acquiring it.”
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For wind instruments was riding past on a solemn white horse.
Everybody wondered who the new arrival was.”
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