Good Faith Violation

The good faith rule indicates that you can’t do an operation with money that is not yet yours, that has not reached your property.

A good faith violation occurs when you purchase a security and sell it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid for securities qualify as settled funds.

An example of a good faith violation would be if an individual sells a stock and receives $10,000 in cash account proceeds on a Monday morning, then buys a different stock for $10,000 on the same Monday afternoon. If the individual sells the second stock prior to Wednesday (the settlement date of the first sale), the transaction would be considered a good faith violation because the second stock was sold before the account had sufficient funds to fully pay for the purchase.

If you incur three good faith violations in a 12-month period, our clearing firm may restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in your account prior to placing a trade, and this restriction will be effective for 90 calendar days.

Do you have any additional questions regarding Good Faith Violation rule? Write to contacto@imhapi.app, we are here to assist you!