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:
“The words which express our faith and piety are not definite; yet they are significant and fragrant like frankincense to superior natures.”
—Henry David Thoreau (1817–1862)
“We enter parliament in order to supply ourselves, in the arsenal of democracy, with its own weapons.... If democracy is so stupid as to give us free tickets and salaries for this bear’s work, that is its affair.... We do not come as friends, nor even as neutrals. We come as enemies. As the wolf bursts into the flock, so we come.”
—Joseph Goebbels (1897–1945)
“Whenever the moon and stars are set,
Whenever the wind is high,
All night long in the dark and wet,
A man goes riding by.”
—Robert Louis Stevenson (1850–1894)