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:
“A faith is something you die for, a doctrine is something you kill for. There is all the difference in the world.”
—Tony Benn (b. 1925)
“American future lies in the East. The great free markets of the Pacific Rim are the American destiny.”
—Donald Freed, U.S. screenwriter, and Arnold M. Stone. Robert Altman. Richard Nixon (Philip Baker Hall)
“Nobody dast blame this man.... For a salesman, there is no rock bottom to the life. He don’t put a bolt to a nut, he don’t tell you the law or give you medicine. He’s a man way out there in the blue, riding on a smile and a shoeshine. And when they start not smiling back—that’s an earthquake. And then you get yourself a couple of spots on your hat, and you’re finished. Nobody dast blame this man. A salesman is got to dream, boy. It comes with the territory.”
—Arthur Miller (b. 1915)