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:
“To exist is equivalent to an act of faith, a protest against the truth, an interminable prayer.... As soon as they consent to live, the unbeliever and the man of faith are fundamentally the same, since both have made the only decision that defines a being.”
—E.M. Cioran (b. 1911)
“Women born at the turn of the century have been conditioned not to speak openly of their wedding nights. Of other nights in bed with other men they speak not at all. Today a woman having bedded with a great general feels free to tell us that in bed the general could not present arms. Women of my generation would have spared the great general the revelation of this failure.”
—Jessamyn West (1907–1984)
“Captain Carpenter rose up in his prime
Put on his pistols and went riding out
But had got wellnigh nowhere at that time
Till he fell in with ladies in a rout.”
—John Crowe Ransom (1888–1974)