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Terry Johnson just discovered that his broker-dealer put a 90-day freeze on his account because he bought and sold common stock before paying for the shares in a cash account. This means that he:
A. cannot purchase securities until the freeze is lifted
B. can purchase securities and pay for them by the settlement date
C. can purchase securities provided he pays for them on the date of the trade
D. cannot purchase securities for 10 business days
Correct Answer: C. can purchase securities provided he pays for them on the date of the trade
Rationale: According to the Federal Reserve Board’s Regulation T, a customer whose account has been frozen as a result of buying and then selling securities in a cash account before paying for them must pay for all securities purchased on the day of the trade until the freeze is lifted.
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