A Freeriding Violation occurs when:
1. You buy stock with proceeds from a sale of the same stock. This practice violates Regulation T of the Federal Reserve Board concerning broker-dealer credit to customers.
2. If you incur 1 freeriding violation in a 12-month period in a cash account, for 90 days your account will be restricted, where you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade.
1. You have $0 available in cash to trade with. On Tuesday, you buy ABC stock for $5,000. Payment for your purchase was not received by Thursday’s settlement date. On Friday, you sell ABC stock for $10,000 to cover the cost of your initial purchase. A freeriding violation has occurred because you did not pay in full for ABC stock before selling it.
Please help us not have a Freeriding Violation. dub appreciates your efforts!