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:
“May it not be that, just as we have to have faith in Him, God has to have faith in us and, considering the history of the human race so far, may it not be that “faith” is even more difficult for Him than it is for us?”
—W.H. (Wystan Hugh)
“If I had not come to America, where I felt free to formulate tentatively insights at which I had empathically arrived, I would have accomplished very little. I would never have begun to publish, to teach, to undertake research. Because if one does not find an assenting echo to one’s ideas, if one is passed over, as I was in Vienna, then one cannot create. To create, after all, is to believe that what one says will count.”
—Margaret S. Mahler (1897–1985)
“But, after the war was over, just think what came to pass—
A letter, sir; and the two were safe back in the old Bluegrass.
The lad had got across the border, riding Kentucky Belle;
And Kentuck she was thriving, and fat, and hearty, and well;
He cared for her, and kept her, nor touched her with whip or spur:
Ah! we’ve had many horses, but never a horse like her!”
—Constance Fenimore Woolson (1840–1894)