2. Cash Account Trading: Unsettled Funds Rule Summary...

After selling a stock in your cash account, technically you are supposed to wait 3 business days
for settlement before the money may be used to buy another security. However, if the new stock
purchased is NOT sold before the previous sale settles, you will not violate any rules.
Here are two examples of using unsettled funds in your cash account, which would cause a good
faith violation (GFV) to be issued:
Next Day GFV Example:
1. Starting cash balance is $0
2. May 1: Sell 100 XYZ for $1000 (settles May 4)
3. Cash balance is now $1000
4. May 2: Buy 100 ABC for $1000. You are not supposed to sell this stock until on or after
May 4 (which is when the sale of XYZ settles).
5. May 3: Sell 100 ABC (Good Faith Violation issued)
If you sell a particular stock today, you are not supposed to buy the same stock back the same
day using the proceeds from the previous sale.
Intraday GFV Example:
1. Starting cash balance is $0
2. June 1 10:00AM: Sell 100 XYZ for $1100 (settles June 4)
3. Cash balance is now $1100
4. June 1 12:30PM: Buy 100 XYZ for $900 (Good faith violation issued).
Note: Good Faith Violations will remain notated in your account for 15 months. Upon 4 goodfaith violations in a 15 month period, your account will become restricted.