A free riding violation in your Interactive Brokers (IBKR) account results in several consequences:
- Account Restriction:
- Your account will be restricted for 90 days
- This restriction begins from the date of the violation.
- Limited Purchase Ability:
- During the 90-day restriction period, you can only purchase securities using settled funds.
- 'Current Available funds' and 'Buying power' in your account will reflect only settled cash.
- It i important to refer to these figures, not the total cash balance, when checking available funds for purchases.
- Selling Securities:
- You can continue to sell securities during the restriction period, even if they are unsettled.
- However, each time you sell an unsettled security, the free riding violation date will be updated, and the 90-day restriction will be reapplied.
- Repeated Violations:
- Be aware that selling unsettled securities and then attempting to use those funds for new purchases will result in a new violation.
- This means the 90-day restriction period will start over, effectively extending the overall restriction time.
It is crucial to understand that while you can sell securities during the restriction period, you cannot use the proceeds from those sales to buy new securities until the funds have settled. This is to prevent further free riding violations.