Freeze, Brokerage Account

In a cash account, an investor must pay for the purchase of a security before selling it.  If an investor buys and sells a security before paying for it, the investor is “freeriding,” which is not permitted under the Federal Reserve Board’s Regulation T and may require the investor’s broker to “freeze” the investor’s cash account for 90 days.  During this 90-day period, an investor may still purchase securities with the cash account, but the investor must fully pay for any purchase on the date of the trade. 

For a more in depth discussion and additional materials, visit our Trading in Cash Accounts page on