Some trading activities within acash accountOpens in a new windowcan lead to restrictions on your account.We can place restrictions on your account for trading practices that violate industry regulations or the Customer Account Agreement.
Details about trading violations
Engaging in freeriding, liquidations resulting from unsettled trades, trade liquidations and marketing-timing will limit your flexibility to make new purchases.
-Freeridingoccurs when you buy and sell securities in a cash account without covering the initial purchase.
Example: You have $1,000 in your cash sweep. You place a market order to purchase $1,000 worth of XYZ stock. The market moves and the order is executed at $1,200, leaving $200 due to settle this transaction. Later that day, the price of XYZ stock increases and you sell XYZ stock for $1,500. Because you purchased with more cash than you had on hand and a $200 cash deposit wasn’t received to cover the initial purchase, the transaction is considered a “Freeride.”
Penalty: Your account is restricted for 90 days. During this time, you must have settled funds available before you can make a purchase.
-Unsettled trades liquidations (Good Faith Violation)occurs when you buy a security in a cash account using sales proceeds that haven't yet settled. Then you sell the recently purchased security before the settlement of the initial sale.
Example: On Monday, you sell XYZ stock for $5,000. Then, on Tuesday you use $3,000 of the unsettled funds from XYZ to purchase ABC stock. Later Tuesday, you notice the price of ABC stock increases and you sell the entire ABC position. Because ABC was bought and sold with unsettled funds, the transaction is considered an “Unsettled trade liquidation.”
On Wednesday, you buy stock B. You must pay for it on Friday (the second day after the trade was placed). But on Wednesday, you decide to sell stock B. Because the sale of stock A hasn't settled, you paid for stock B with unsettled funds.
Penalty: Any 3 violations in a rolling 52-week period trigger a 90-day funds-on-hand restriction. During this time, you must have settled funds available before you can make a purchase.
-Late sale or trade liquidations (Cash Liquidation Violation)occurs when you buy a security without enough funds to cover the purchase and sell another, at a later date, in a cash account. The settlement of the buy and the subsequent sell don't match, which is a violation. This is also known as a "late sale."
Example: You have $2,000 in your cash sweep. On Wednesday, you place a trade to purchase $2,000 worth of XYZ stock. The market moves and the order is executed at $2,100. The next day, you notice the trade exceeded your available funds and decide to liquidate $100 of ABC stock to cover the amount due. Because the $100 from the sale of ABC stock does not settle until after the XYZ purchase settles, a “Late Sale Liquidation” has occurred.
Penalty: Any 3 violations in a rolling 52-week period trigger a 90-day funds-on-hand restriction. During this time, you must have settled funds available before you can make a purchase.
-Frequent trading or market-timingoccurs when some investors try to profit from strategies involving frequent trading of mutual funds, such as market-timing. They buy in and sell out of a fund excessively, which can disrupt the fund's management and result in higher costs that are borne by all of the fund's shareholders.
Example: Excessive purchase and redemption activity within the same fund. Excessive exchange activity between 2 or more funds within a short time frame.
Penalty: TIAA and the fund families reserve the right to decline a transaction if it appears you're engaging in frequent-trading practices, such as market-timing. In addition, when you sell a No Transaction Fee mutual fund, that you have owned for less than a year, you may incur ashort-term redemption fee.
