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Freeze, Brokerage Account
In a cash account, an investor must
pay for the purchase of a security before selling it. If an investor buys and
sells a security before paying for it, the investor is “freeriding”, which is not
permitted under the Federal Reserve Board’s
Regulation T and may require
the investor’s broker to “freeze” the investor’s cash account for 90 days. During
this 90-day period, an investor may still purchase securities with the cash
account, but the investor must fully pay for any purchase on the date of the
trade. For more information on the 90-day freeze, please read our investor
bulletin “Trading in Cash
Accounts – Beware of the 90-Day Freeze under Regulation T,” and the cash
account provisions of the
Federal Reserve Board’s
Regulation T.
http://www.sec.gov/answers/freeze.htm
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