What is a “Freeriding” violation?
When trading securities, the full purchase amount for the security bought must be paid by the settlement date for the trade. Settlement date for stocks is normally three business days after the trade is executed. Any proceeds from the sale of securities will be credited to your account in the same manner, generally three days after the sale is executed. This is especially important to remember if a security is bought and sold in the same day. The security purchased must be paid for in full in order to avoid a potential trade violation. If proceeds from the sale of a security are used to pay the amount due from the purchase of the same security, a violation of the Federal Reserve Board’s “Regulation T” will have occurred. This is known as freeriding. Securities regulations require the account in which the trade violation occurred to be restricted for 90 days. During the 90-day “restricted” period, we will require that the account have 100% of the purchase amount available before accepti
