Good Faith Violation – Regal Securities

RBC Correspondent Services

Regal Securities through its clearing agent RBC Correspondent Services, is required to implement policies concerning trading with unsettled funds. Your account can be charged with a Good Faith Violation (GFV) if you sell a security that was purchased with unsettled funds and then sold prior to the settlement of the first sell (see examples below). Three (3) GFV’s in any twelve (12) month rolling period will result in your account being restricted to liquidating transactions only for 90 days. Please note that stocks settle in two business days and options settle in one business day.

Stock Example:

On Monday customer sells “A” for $5,000, of a long, settled and fully paid for position.
On Monday customer buys “B” for $5,000 using the proceeds from sale of “A” which settles on Wednesday.
On Monday or Tuesday customer sells “B”, the sale would result in a good faith violation since “B” was sold prior to the settlement of “A”.

Option Example:

On Monday customer sells “A” for $1,000, of a long, settled and fully paid for position.
On Monday customer buys “B” for $1,000 using the proceeds from sale of “A” which settles on Tuesday.
On Monday customer sells “B”, the sale would result in a good faith violation since “B” was sold prior to the settlement of “A”.

Hilltop Securities, Inc.

Regal Securities through its clearing agent Hilltop Securities, Inc. is required to implement policies concerning trading with unsettled funds. Your account can be charged with a Good Faith Violation (GFV) if you sell a security that was purchased with unsettled funds and then sold prior to the settlement of the first sell (see example below). Three (3) GFV’s in any twelve (12) month rolling period will result in your account being restricted to liquidating transactions only for 90 days..

Example:

On Monday customer sells “A” for $5,000, of a long, settled and fully paid for position.
On Monday customer buys “B” for $5,000.
On Monday, Tuesday or Wednesday customer sells “B”, the sale would result in a good faith violation.

Also note that if you make multiple opening transactions, the sum of the purchases and or requirements for that day will be applied. If the sum exceeds the settled funds and a violation takes place a GFV will be charged.

Example:

On Monday customer has $5,000 in settled funds. Customer sells “A” for $3,000, of a long, settled and fully paid for position.
On Monday customer buys “B” for $4,000 and buys “C” for $4,000.
On Monday customer sells “B”, the sale would result in a good faith violation since the sum of the purchase of $8,000 is greater than settled funds of $5,000. Even though only “B” was sold where the purchase price is less than the settled funds, the sum of the purchases is applied to determine if good faith violation is to be charged.

For questions contact Regal at 1-877-488-6534.