I don't understand or know what my broker is trying to make me believe, but I have an excess of 75K in my account and they are pulling all kinds of stuff. I had a trade going a few weeks ago, sold it and then had some different information that made me want to buy the same stock back again. They are pulling the three day settlement rule on me saying the Federal law says I have to wait 3 days for the money to clear before I can use it again.

I have a CASH only account and they are telling me it would be no big deal if I changed to a margin account. I don't understand what they are doing. I can only assume that they want me to use their money during that 3 days to create income for their business. They are also selling my stock ahead of the posted time. In other words I had a stop loss, even though I canceled it before it sold, they sold it anyway. Now I can't see the time they did this, because I'm sure that I canceled the trade before the sale went through. What can I do?

Last time I bought stock before the settlement date, they said it's a federal law that says I can't buy before the settlement date, and they said if I buy stock before the settlement date they will lock my account for 90 days.

I have a cash only account, and I said the money was there for me to use, and if I can't why doesn't their computer software stop me from using it? I got no answer. Is that the law, and can they lock me out of my account for 90 days?

Just to be clear, I never use anything but my own cash to buy stock in my cash only account, but they said if I had a margin account buying stock within that 3 days "this would be no big deal". But if I have a margin account that way they can charge interest during that 3 day period, because originally I had a margin account and switched to a cash only account, and when I had that margin account they did in fact charge interest for that three day period for using their money until my money cleared so they say, that's why I changed to a cash only account, and I think they are not fond of it.

Please tell me if the the law will allow them lock me out of my account if I buy stock with my money that hasn't cleared the 3-day settlement period?

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    You're asking about the law. What country are you in? Commented Sep 9, 2013 at 20:55

2 Answers 2


Brokerage firms must settle funds promptly, but there's no explicit definition for this in U.S. federal law. See for example, this article on settling trades in three days. Wikipedia also has a good write-up on T+3.

It is common practice, however. It takes approximately three days for the funds to be available to me, in my Canadian brokerage account. That said, the software itself prevents me from using funds which are not available, and I'm rather surprised yours does not.

You want to be careful not to be labelled a pattern day trader, if that is not your intention. Others can better fill you in on the consequences of this. I believe it will not apply to you unless you are using a margin account.

All but certainly, the terms of service that you agreed to with this brokerage will specify the conditions under which they can lock you out of your account, and when they can charge interest.

If they are selling your stock at times you have not authorised (via explicit instruction or via a stop-loss order), you should file a complaint with the S.E.C. and with sufficient documentation. You will need to ensure your cancel-stop-loss order actually went through, though, and the stock was sold anyway. It could simply be that it takes a full business day to cancel such an order.


Here's how this works in the United States.

Cash Accounts

There's no law regarding your behavior in this matter and you haven't broken any laws.

But your broker-dealer has a law that they must follow. It's documented here:

The issue is if you buy stock before your sell has settled (before you've received cash) then you're creating money where before none existed (even though it is just for a day or two). The government fears that this excess will cause undue speculation in the security markets. The SEC calls this practice freeriding, because you're spending money you have not yet received.

In summary: your broker is not allowed to loan money to an account than is not set-up for loans; it must be a margin account.

Margin Accounts

People with margin account are able to day-trade because they have the ability to use margin (borrow money). Margin Accounts are subject to Pattern Daytrading Rules. The Rules are set forth by FINRA (The Financial Industry Reporting Authority) and are here:

  • In my personal experience this provision was waived when I talked to someone at my broker-dealer (Charles Schwab).
    – dcaswell
    Commented Sep 10, 2013 at 23:55
  • Asking - is this situation only possible in a cash account or are margin accounts subject to this as well? Commented Sep 11, 2013 at 0:46
  • Margin account are subject to different rules. I updated the answer with that info.
    – dcaswell
    Commented Sep 11, 2013 at 0:57
  • +1, got it. I was unaware of the rules as I trade very little, and never ran into this issue. Commented Sep 11, 2013 at 1:35
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    How can you be creating money? If you don't get the money until T+3 after you sell, why doesn't a similar thing happen when buying? I mean, obviously the money has to be made not available to you when you buy so you can't double-spend it, but it doesn't actually have to reach the buyer until T+3. The sell should clear before or at that time and then be available for the buy...
    – user12515
    Commented Nov 8, 2019 at 15:56

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