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:
“His singing carried me back to the period of the discovery of America ... when Europeans first encountered the simple faith of the Indian. There was, indeed, a beautiful simplicity about it; nothing of the dark and savage, only the mild and infantile. The sentiments of humility and reverence chiefly were expressed.”
—Henry David Thoreau (1817–1862)
“I struck the board, and cried, ‘No more,
I will abroad!
What? shall I ever sigh and pine?
My lines and life are free, free as the road,
Loose as the wind, as large as store.
Shall I be still in suit?”
—George Herbert (1593–1633)
“Wilmer Cook: Keep on riding me, they’re gonna be picking iron out of your liver.
Sam Spade: The cheaper the crook, the gaudier the patter.”
—John Huston (1906–1987)