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:
“In faith I do not love thee with mine eyes,
For they in thee a thousand errors note,
But ‘tis my heart that loves what they dispise,”
—William Shakespeare (1564–1616)
“You have waited, you always wait, you dumb, beautiful ministers,
We receive you with free sense at last, and are insatiate
hence-forward,
Not you any more shall be able to foil us, or withhold yourselves
from us,
We use you, and do not cast you aside—we plant you permanently within us,
We fathom you not—we love you—there is perfection in you also,
You furnish your parts, toward eternity,
Great or small, you furnish your parts toward the soul.”
—Walt Whitman (1819–1892)
“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)