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Account violations

Cash account trade violations

If you pay for a purchase with cash that is yet to settle — or the account does not hold enough cash — a trade violation may occur. If that happens, restrictions may be placed on your account.

Tips to avoid trade violations in a cash account

  • Whenever possible, use settled cash to pay for purchases.
  • Check your "settled cash buying power" and "cash available to invest" on the Balances screen.
  • Double check that you're trading in the correct account.
  • Avoid day trading in a cash account.

Types of cash account violationsFootnote asterisk *

Freeride violations

A freeride occurs when you sell a security in a cash account before sufficient funds have settled to cover that purchase. This could be due to using proceeds from a sale before settlement, or from simply exceeding available funds. Either way, if you've sold the shares before paying for them, you've committed a freeride violation.

Technical violations (cash liquidation violations)

A technical violation occurs when you purchase a security and then sell a different security on a later date to cover that purchase.

Sale-not-long violations

Selling a security that isn't held in your account is also known as a sale-not-long violation. This is often the result of mistakenly placing a trade in the wrong account. If you realize that you've placed a trade in the wrong account, contact us as soon as possible. A sale-not-long violation is incurred once you close out the position you sold in error.
Footnote asterisk * This is not an exhaustive list of ways you could incur a violation.
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