Funding Requirements

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Trades placed in a cash account require 3 business days for the funds to fully settle before they can be used again to buy and sell. "Settlement" refers to the official transfer of the securities to the buyer's account and the cash to the seller's account. Usually the time taken for a transaction to settle is 3 business days. That is, if you purchase a security on Monday, the transaction will settle on Thursday.

Good-Faith Violation
Good-faith violations occur when the purchase of a security uses funds that have yet to settle in the account. Each account is allowed to have up to 3 good-faith violations per 12 month rolling period before the account is put into a 90-day restriction on the 4th strike of a violation. Each good-faith violation will automatically expire after 12 months from the violation date (T/D Date).

90-Day Restriction
Once the account is placed under a 90-day restriction, the account can no longer place internet orders. All trades must be placed by Firstrade’s brokers during the 90-day period to prevent the account holder from using unsettled funds again. The following are some instances when an investor's account will be restricted:

  • When an account triggers a good-faith violation for the 4th time within 12 months.
  • When an investor makes day trades using unsettled funds. View scenario
  • When an investor sells securities before fully paying for those securities. View scenario

To remove the 90-Day restriction, an investor must deposit enough funds to cover the violation within 5 business days.

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