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:
“Christianity only hopes. It has hung its harp on the willows, and cannot sing a song in a strange land. It has dreamed a sad dream, and does not yet welcome the morning with joy. The mother tells her falsehoods to her child, but, thank heaven, the child does not grow up in its parent’s shadow. Our mother’s faith has not grown with her experience. Her experience has been too much for her. The lesson of life was too hard for her to learn.”
—Henry David Thoreau (1817–1862)
“In private life he was good-natured, chearful, social; inelegant in his manners, loose in his morals. He had a coarse, strong wit, which he was too free of for a man in his station, as it is always inconsistent with dignity. He was very able as a minister, but without a certain elevation of mind necessary for great good, or great mischief.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)
“True Thomas lay on Huntlie bank;
A ferlie he spied wi’ his e’e;
And there he saw a lady bright,
Come riding down by the Eildon Tree.”
—Unknown. Thomas the Rhymer (l. 1–4)