What is a Good Faith Violation?
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Written by Chanel
Updated over a week ago

If a Share you have purchased is sold prior to being paid for with settled funds, a Good Faith Violation (GFV) has occurred.

If you receive three (3) GFV’s in a 12-month period you will be restricted to purchasing Shares with only settled funds for a period of 90 days.

Further to this, any additional trades that will result in a GFV or are greater than $1000 in value may be canceled.

Remembering a GFV occurs when a stock is sold, let’s use some examples:

Example 1

Customers US Wallet balance = $0.00

  • On Monday morning this customer sells Y stock netting $500 (yay!).

  • On Monday afternoon, the then uses the $500 to buy $500 worth of X stock.

  • If the X stock is sold prior to Wednesday (settlement date of the Y sale), a GFV would apply as the X stock is not considered fully paid prior to sale.

Example 2:

Customers US Wallet balance = $500

  • On Monday morning, a purchase is made for $500 of X stock.

  • On Monday mid-day, the customer sells the X stock for $550.

  • Near market close, the customer purchases $550 of Y stock.

  • At this point no GFV has occurred because the customer had sufficient funds for the purchase of X.

  • But, if Y is sold prior to the settlement of X stock then a GFV will have occurred.

Example 3:

Customers US Wallet balance = $1000

Customer also has $500 available from unsettled activity after selling stock on Friday.

  • On Monday morning, the customer purchases $1500 of Y stock.

  • A GFV occurs if this customer sells the Y stock on Monday.

  • The GFV occurs as the purchase of Y is not considered fully paid, because the $500 proceeds from the sale on the previous Friday don’t settle until Tuesday.

We get this one can be a little confusing and hope this guide has helped you.

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