Stock trading, free ride penalty.?
What is the actual penalty for a “free ride”, when trading stock. If this is the first time, seeing that I’m only just now thinking about doing done it, and I’m using Scottrade to trade stocks, is it just a matter of freezing my account for 90 days? I have a feeling a stock I own is going to tank, and I want to sell it before my 3 days are up, but since I used unsettled funds to buy the stock, what exactly will happen? Will I even be able to execute the sell order? Thanks.
I looked on the sec’s website and it states my account would be froozen for 90 days, but does that mean I can’t close the account either?
Your question was asked before. Here’s the answer.
“You would definitely be free-riding, and it is a mandatory 90 day freeze on your account, but that doesn’t mean that you wouldn’t be allowed to trade during those 90 days. It just means that you would only be allowed to buy stocks with settled funds. So when you sell a stock, you would have to wait three days before you could use those funds to buy more stock. Currently your broker allows you to use the proceeds of the stock sale immediately, if your account is frozen, you would have to wait the three days. I assume that you do not have a margin account. It would be a good idea to look into getting one. Just for this very reason.
According to SEC rules, if you violate Reg. T it is mandatory that your broker put a 90 day restriction on your account. I can’t tell you how strict Scottrade is about enforcing this rule, because I don’t use Scottrade, and I have never had this problem.”
“I use scottrade and have free-rode once before. You do get a mandatory 90 day restriction. You can trade normally throughout the 90 days without any more free-riding.
The only course of action scottrade takes is:
They call you. If you don’t answer, they leave a message saying ‘call me back.’ If you do, I don’t know what they say- I didn’t answer.
They also leave a message in your account about the restriction. At the bottom you click ‘I have read this,’ then go to your account. Everything is normal.
As a small rant- I wish scottrade would put non-free ridable funds in ‘Total Funds Available for Trading.’ Obviously they are NOT available for trading. Either I’m reading it wrong, or they should really look into this.”
