Go to Jeff Salisbury LWGate Home Page.From: "Gene Ricci" <genr@swbell.net>
Subject: Re: [CANSLIM] New NASD trading restrictions?
Date: Wed, 19 Mar 2003 12:38:55 -0600
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Jerome, brokers must follow the requirements of FRB but that doesn't =
mean that they can't implement tighter requirements. For example, many =
brokers (including Schwab) limit the type of options that can be traded =
in an IRA (in Schwab's case covered calls) while many others like =
OptionsXpress.com "allow prudent trading of options in IRAs based on =
your individual suitability. At this time, based on industry =
regulations, trading in IRAs includes call buying, put buying, cash =
secured put writing, spreads, and covered calls. Naked puts and naked =
calls are not currently allowed in IRAs."=20
As painful as it may be, my recommendation is to find a broker that =
meets your needs.
A "work-around' might be to have a small reserve and buy a 1/4 to 1/2 of =
what you would normally buy and add to the positions when additional =
funds are available.=20
Good luck,
Gene
=20
----- Original Message -----=20
From: Jerome Buckmelter=20
To: canslim@lists.xmission.com=20
Sent: Wednesday, March 19, 2003 1:53 AM
Subject: RE: [CANSLIM] New NASD trading restrictions?
Just to set the record straight, I have never violated any trading law
or ever had my accounts restricted, so that is not the issue. =
Moreover,
Ameritrade admitted that the letter they sent me is a form letter that
they send to all who inquire of this matter (see cut-and-paste excerpt
below). And again the Client Services staff is telling me that this is =
a
new interpretation from the FRB as of March 13, 2003. Note that the
second paragraph states clearly that one cannot purchase a stock from
the proceeds from a sale made the same day, and must wait generally
three days before reinvesting. I contacted the FRB and the say that =
one
can sell a stock and purchase another one on the same day as long as =
the
purchased stock isn't sold the same day (see the second cut-and-paste
excerpt below) from the FRB. So, it is clear that Ameritrade is =
wrong,
but how do they get off restricting one's account, and more =
importantly
what can one do to resolve the issue? Thanks to all who have =
responded
to this thread, your input has been appreciated. Jerome
~~~~~~~~
[Below is cut-and-paste excerpt from Ameritrade:]
[begin text]"We are contacting you to explain how recent regulatory
guidance we received related to cash accounts will impact your trading
activity.=20
"RESTRICTIONS IN CASH ACCOUNTS
Under applicable interpretations issued by the staff of the Board of
Governors of the Federal Reserve System, cash account clients are
prohibited from making a practice of selling securities without having
paid for their purchase with "cash" available in their account. "Cash"
includes existing cash in the account, the proceeds of settled sales =
of
fully-paid for securities, and additional cash deposits. Proceeds of a
sale may not be included as "cash" before the settlement date - which =
is
generally three business days."[end text]=20
~~~~~~~~~
[Below is cut-and-paste excerpt from FRB:]
[begin text]"Please note that one can sell a stock and purchase =
another
one that same day with the=20
proceeds, provided that one does not intend to sell the second =
security
before the=20
purchase settles. The two staff opinions attached illustrate this
concept.
5-616.15
CASH ACCOUNT-Sale and Subsequent Repurchase of a Security
A customer has a cash account with fully paid-for securities and no
cash. On trade=20
date, the customer instructs the creditor to sell the securities. =
Later
on the same=20
trade date the customer instructs the creditor to repurchase the same
issue of=20
securities for the same cost.
Each transaction effected in a cash account must be permissible under
section=20
220.8(a) of Regulation T. The sale is permissible under section
220.8(a)(2)(i) of=20
Regulation T, which allows a creditor to sell a security for a =
customer
if "the=20
security is held in the account." The purchase is permissible under
section=20
220.8(a)(1)(ii), which allows a creditor to purchase a security for a
customer if=20
"the creditor accepts in good faith the customer's agreement that the
customer will=20
promptly make full cash payment for the security or asset before =
selling
it and does=20
not contemplate selling it prior to making such payment."
Board staff was asked whether the customer should be deemed a day =
trader
and whether=20
Regulation T requires the customer to pay in full for the purchase =
with
new funds=20
rather than applying the proceeds of the sale of the fully paid-for
securities to=20
avoid the imposition of a 90-day freeze pursuant to section 220.8(c).
The term "day=20
trader" does not appear in Regulation T, and Board staff believes that
the customer=20
is not required to pay for the purchase with new funds if the =
securities
are not=20
resold prior to the settlement date. According to section 220.8(c)(1),
the 90-day=20
freeze is triggered "if a nonexempted security in the account is sold =
or
delivered to=20
another broker or dealer without having been previously paid for in =
full
by the=20
customer." The customer in the example has not engaged in this =
activity.
STAFF OP. of=20
Jan. 6, 2000.
Authority: 12 CFR 220.8(a) and (c)...." [end text]
-----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com] On Behalf Of =
Spencer48@aol.com
Sent: Tuesday, March 18, 2003 2:29 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] New NASD trading restrictions?
Tom & Robert:
I think I was, indeed, shooting from the hip.
As I understand it now (as you explained it in your 3/17, 11:29 =
AM=20
E-mail to Canslim, which, in part, says: "...Jerome, perhaps you did
not=20
understand my prior reply, but the attachment you posted from =
Ameritrade
does=20
not prohibit you from buying one stock with the proceeds from another
sale=20
done the same day. It did inform you that your acct was restricted, as =
I
pointed out, if you had not done any sales, then that is obviously an
error.=20
One thing that did occur to me is that you are transferring into
Ameritrade=20
an acct from another firm. If that acct is already restricted due to a =
violation of a Fed call or Reg T call that was not met, or a sale
without=20
paying for the purchase, then that restriction travels with the acct =
on
the=20
transfer, since that is a Fed Reserve rule, not Ameritrade, nor
Schwab...."),=20
Jerome bought without his check clearing and then sold what he had
bought. =20
Of course, this means he would have used Ameritrade as the risk-taker.
However, I could be wrong in this case too (it might not have
happened=20
this way). In any event, in order to save my vision from=20
brokerage-speak-fine-print, I think I just want let this subject (at
least=20
from my side):Drop!
jans
=20
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-In the email body, write "subscribe canslim" or
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<BODY bgColor=3D#ffffff>
<DIV><FONT face=3D"Comic Sans MS">Jerome, brokers must follow the=20
requirements of FRB but that doesn't mean that they can't implement =
tighter=20
requirements. For example, many brokers (including Schwab) limit =
the type=20
of options that can be traded in an IRA (in Schwab's case covered =
calls)=20
while many others like OptionsXpress.com "</FONT><FONT=20
face=3D"Times New Roman">allow prudent trading of options in IRAs based =
on your=20
individual suitability. At this time, based on industry regulations, =
trading in=20
IRAs includes call buying, put buying, cash secured put writing, =
spreads, and=20
covered calls. Naked puts and naked calls are not currently allowed in =
IRAs."=20
</FONT></DIV>
<DIV> </DIV>
<DIV><FONT face=3D"Comic Sans MS">As painful as it may be, my =
recommendation is to=20
find a broker that meets your needs.</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"></FONT> </DIV>
<DIV><FONT face=3D"Comic Sans MS">A "work-around' might be to have =
a small=20
reserve and buy a 1/4 to 1/2 of what you would normally buy and add =
to the=20
positions when additional funds are available. </FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"></FONT> </DIV>
<DIV><FONT face=3D"Comic Sans MS">Good luck,</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS">Gene</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"> </FONT> </DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Djsjbuck@myexcel.com =
href=3D"mailto:jsjbuck@myexcel.com">Jerome=20
Buckmelter</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Wednesday, March 19, 2003 =
1:53=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> RE: [CANSLIM] New NASD =
trading=20
restrictions?</DIV>
<DIV><BR></DIV>Just to set the record straight, I have never violated =
any=20
trading law<BR>or ever had my accounts restricted, so that is not the=20
issue. Moreover,<BR>Ameritrade admitted that the letter they =
sent me is=20
a form letter that<BR>they send to all who inquire of this matter (see =
cut-and-paste excerpt<BR>below). And again the Client Services staff =
is=20
telling me that this is a<BR>new interpretation from the FRB as of =
March 13,=20
2003. Note that the<BR>second paragraph states clearly that one =
cannot=20
purchase a stock from<BR>the proceeds from a sale made the same day, =
and must=20
wait generally<BR>three days before reinvesting. I contacted the =
FRB and=20
the say that one<BR>can sell a stock and purchase another one on the =
same day=20
as long as the<BR>purchased stock isn't sold the same day (see the =
second=20
cut-and-paste<BR>excerpt below) from the FRB. So, it is clear =
that=20
Ameritrade is wrong,<BR>but how do they get off restricting one's =
account, and=20
more importantly<BR>what can one do to resolve the issue? Thanks =
to all=20
who have responded<BR>to this thread, your input has been =
appreciated. =20
Jerome<BR>~~~~~~~~<BR>[Below is cut-and-paste excerpt from=20
Ameritrade:]<BR>[begin text]"We are contacting you to explain how =
recent=20
regulatory<BR>guidance we received related to cash accounts will =
impact your=20
trading<BR>activity. <BR><BR>"RESTRICTIONS IN CASH ACCOUNTS<BR>Under=20
applicable interpretations issued by the staff of the Board =
of<BR>Governors of=20
the Federal Reserve System, cash account clients are<BR>prohibited =
from making=20
a practice of selling securities without having<BR>paid for their =
purchase=20
with "cash" available in their account. "Cash"<BR>includes existing =
cash in=20
the account, the proceeds of settled sales of<BR>fully-paid for =
securities,=20
and additional cash deposits. Proceeds of a<BR>sale may not be =
included as=20
"cash" before the settlement date - which is<BR>generally three =
business=20
days."[end text] <BR>~~~~~~~~~<BR>[Below is cut-and-paste excerpt from =
FRB:]<BR>[begin text]"Please note that one can sell a stock and =
purchase=20
another<BR>one that same day with the <BR>proceeds, provided that one =
does not=20
intend to sell the second security<BR>before the <BR>purchase =
settles. =20
The two staff opinions attached illustrate=20
this<BR>concept.<BR><BR><BR> 5-616.15<BR>CASH ACCOUNT-Sale and =
Subsequent=20
Repurchase of a Security<BR>A customer has a cash account with fully =
paid-for=20
securities and no<BR>cash. On trade <BR>date, the customer instructs =
the=20
creditor to sell the securities. Later<BR>on the same <BR>trade date =
the=20
customer instructs the creditor to repurchase the same<BR>issue of=20
<BR>securities for the same cost.<BR>Each transaction effected in a =
cash=20
account must be permissible under<BR>section <BR>220.8(a) of =
Regulation T. The=20
sale is permissible under section<BR>220.8(a)(2)(i) of <BR>Regulation =
T, which=20
allows a creditor to sell a security for a customer<BR>if "the =
<BR>security is=20
held in the account." The purchase is permissible under<BR>section=20
<BR>220.8(a)(1)(ii), which allows a creditor to purchase a security =
for=20
a<BR>customer if <BR>"the creditor accepts in good faith the =
customer's=20
agreement that the<BR>customer will <BR>promptly make full cash =
payment for=20
the security or asset before selling<BR>it and does <BR>not =
contemplate=20
selling it prior to making such payment."<BR>Board staff was asked =
whether the=20
customer should be deemed a day trader<BR>and whether <BR>Regulation T =
requires the customer to pay in full for the purchase with<BR>new =
funds=20
<BR>rather than applying the proceeds of the sale of the fully=20
paid-for<BR>securities to <BR>avoid the imposition of a 90-day freeze =
pursuant=20
to section 220.8(c).<BR>The term "day <BR>trader" does not appear in=20
Regulation T, and Board staff believes that<BR>the customer <BR>is not =
required to pay for the purchase with new funds if the =
securities<BR>are not=20
<BR>resold prior to the settlement date. According to section=20
220.8(c)(1),<BR>the 90-day <BR>freeze is triggered "if a nonexempted =
security=20
in the account is sold or<BR>delivered to <BR>another broker or dealer =
without=20
having been previously paid for in full<BR>by the <BR>customer." The =
customer=20
in the example has not engaged in this activity.<BR>STAFF OP. of =
<BR>Jan. 6,=20
2000.<BR>Authority: 12 CFR 220.8(a) and (c)...." [end=20
text]<BR><BR><BR><BR>-----Original Message-----<BR>From: <A=20
=
href=3D"mailto:owner-canslim@lists.xmission.com">owner-canslim@lists.xmis=
sion.com</A><BR>[mailto:owner-canslim@lists.xmission.com]=20
On Behalf Of <A =
href=3D"mailto:Spencer48@aol.com">Spencer48@aol.com</A><BR>Sent:=20
Tuesday, March 18, 2003 2:29 PM<BR>To: <A=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
<BR>Subject:=20
Re: [CANSLIM] New NASD trading restrictions?<BR><BR>Tom &=20
Robert:<BR><BR> I think I was, indeed, =
shooting from=20
the hip.<BR><BR> As I understand it now (as =
you=20
explained it in your 3/17, 11:29 AM <BR>E-mail to Canslim, which, in =
part,=20
says: "...Jerome, perhaps you did<BR>not <BR>understand my prior =
reply,=20
but the attachment you posted from Ameritrade<BR>does <BR>not prohibit =
you=20
from buying one stock with the proceeds from another<BR>sale <BR>done =
the same=20
day. It did inform you that your acct was restricted, as =
I<BR><BR>pointed out,=20
if you had not done any sales, then that is obviously an<BR>error. =
<BR>One=20
thing that did occur to me is that you are transferring =
into<BR>Ameritrade=20
<BR>an acct from another firm. If that acct is already restricted due =
to a=20
<BR>violation of a Fed call or Reg T call that was not met, or a=20
sale<BR>without <BR>paying for the purchase, then that restriction =
travels=20
with the acct on<BR>the <BR>transfer, since that is a Fed Reserve =
rule, not=20
Ameritrade, nor<BR>Schwab...."), <BR>Jerome bought without his check =
clearing=20
and then sold what he had<BR>bought. <BR>Of course, this means =
he would=20
have used Ameritrade as the =
risk-taker.<BR><BR> =20
However, I could be wrong in this case too (it might not =
have<BR>happened=20
<BR>this way). In any event, in order to save my vision from=20
<BR>brokerage-speak-fine-print, I think I just want let this subject=20
(at<BR>least <BR>from my=20
side):Drop!<BR><BR>jans<BR><BR> =
<BR><BR>-<BR>-To=20
subscribe/unsubscribe, email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
the=20
email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". Do=20
not use quotes in your email.<BR><BR><BR>-<BR>-To =
subscribe/unsubscribe, email=20
"<A =
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
=20
the email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". =20
Do not use quotes in your email.</BLOCKQUOTE></BODY></HTML>
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- -In the email body, write "subscribe canslim" or
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