Chapter 2. Brokerage Office Procedures & Back Office Operations - D. Violations
If the customer fails to pay for the purchase within the five business days allowed, the customer is in violation of Regulation T. As a result, the brokerage firm will “sell out” and freeze the customer’s account. On the sixth business day following the trade date, the brokerage firm will sell out the securities that the customer failed to pay for. The customer is responsible for any loss that may occur as a result of the “sell out” and the brokerage firm may sell out shares of another security in the investor’s account in order to cover the loss. The brokerage firm will then freeze the customer’s account, which means that the customer must deposit money up front for any purchases they want to make in the next 90 days. After the 90 days have expired, the customer is considered to have reestablished good credit and may then conduct business in the “regular way” and take up to five business days to pay for their trades. A customer may get an additional five business days to pay for the trade by requesting an extension. An extension request must be submitted to the NYSE or FINRA before the expiration of the fifth business day. A broker dealer may ignore a call for cash of $1,000 or less.