Margin Accounts
A customer buys $10,000 of stock in a cash account on Monday, sells it on Wednesday for $11,000, and uses the proceeds to pay for the original purchase. This practice is known as:
This is freeriding - buying securities in a cash account and selling them before paying for them in full, using the sale proceeds to cover the purchase. Freeriding violates Regulation T and results in a 90-day freeze on
Complete Analysis & Legal Rationale
This is freeriding - buying securities in a cash account and selling them before paying for them in full, using the sale proceeds to cover the purchase. Freeriding violates Regulation T and results in a 90-day freeze on the account, requiring funds to be deposited before placing future trades.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing concept in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Primary source referenced in the explanation (Regulation T). Verify before launch.