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:
“Music is the sound of the universal laws promulgated. It is the only assured tone. There are in it such strains as far surpass any man’s faith in the loftiness of his destiny. Things are to be learned which it will be worth the while to learn.”
—Henry David Thoreau (1817–1862)
“The subjectivist in morals, when his moral feelings are at war with the facts about him, is always free to seek harmony by toning down the sensitiveness of the feelings.”
—William James (1842–1910)
“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)