Free Ride Rule

[HeavilyArmed]

I think I understand the logic behind this antique rule but I'm unclear of the enforcement and consequences. Assume I sell a position that is roughly all of my account balance (not a margin account). Later same day I buy a similar position with the uncleared funds. For the next 3 days I'm not suposed to sell this position. Will my broker refuse the order? Will it be executed and then the SEC does......? Thanks in advance.

[Chapter7]

My friend ran into this with his Scottrade account. He purchased an IPO and sold it later that day, which apparently violated this rule. He was using Scottrade so it was automated. The trade went through fine. He actually did the same thing again a couple of days later.

He just got an e-mail from Scottrade citing the rule and told him that if he continued to violate it, that they would suspend his trading privileges for a period of time. I don't recall how long. Maybe a month or two. So if its an online brokerage account, they really don't do anything initially except give you a warning. The transaction should be processed fine.