Cash Accounts

What this video covers

• Why a cash account requires 100% payment by settlement with zero borrowing from the broker-dealer, and how that differs from a margin account
• What the T+1 settlement cycle means in practice: trade date plus one business day, and why the gap between trade and settlement creates risk
• How freeriding occurs when a customer sells a security before paying for the original purchase, using sale proceeds to fund the buy they never paid for
• Why freeriding violates Regulation T of the Federal Reserve Board even when the buy and sell occur days apart, not just same-day
• What a 90-day freeze actually entails: the account stays open, trading continues, but the customer must deposit settled funds upfront before any new purchase
• The critical exam distinction between freeriding (a payment failure) and day trading (a timing pattern), and which one is perfectly legal
• What corrective action a broker-dealer must take if a customer lacks funds by the settlement date, and what happens during the freeze period