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:
“People who are always praising the past
And especially the times of faith as best
Ought to go and live in the Middle Ages
And be burnt at the stake as witches and sages.”
—Stevie Smith (1902–1971)
“That’s free enterprise, friends: freedom to gamble, freedom to lose. And the great thing—the truly democratic thing about it—is that you don’t even have to be a player to lose.”
—Barbara Ehrenreich (b. 1941)
“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)