Temporarily deposit cash into a Fidelity HSA to avoid Reg T violation

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
So I made a mistake. I sold my position in one stock yesterday and immediately bought another stock - executed yesterday. Settled cash balance is essentially 0. I want to sell that stock today (ideally right now). Is there anything I can do or do I just have to wait until the end of the 3 days to sell? I'm not too worried about the stock decreasing as I think it's already hit it's bottom point, but I would like to be able to cash out now just in case. Can I deposit cash into an HSA and take it out in 3 days? Any tax ramifications? Does Fidelity allow this? Is there any other way to resolve this?

Member Summary
Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

The only way I know around this (and I have been there) is get a margin account vs cash account. I am assuming by your post you have a cash account in which case for this trade, you will need to wait three or four days. The reason I say 3 or 4 days is Fidelity has moved some settlement activity from about 6:00 AM Eastern time to overnight settlement day.
I made trades Monday 03-27-17 in a margin account. That money may not be withdrawn, but I could trade with it in a matter of a minute or two. Actual settlement will not occur until Thursday 03-30-17 evening.
I can take some cash out in the mean time, but Fidelity charges margin interest if I do.
For a more specific answer, call the number on your monthly statement or confirmation.  I believe there is a telephone number on the screen just after you log on.

This seems to be cash liquidation violation, not reg T. See here:

https://www.fidelity.com/learning-center/trading-investing/tradi...

When I read your post, and then this article, I was truly shocked. I have been doing this for years, at Fidelity, IRA (cash) account. I never got a warning or suspension. To be honest, I find this 3 day settlement stuff pretty stupid in the first place.

Added response to oko. You can and maybe should check links under the Balances tab after you sign in.

Trading Profile
Trade Restrictions & Violations. Opens in new window. Click Show AllText
Commissions & Price Improvement Summary . Opens in new window.
Account Agreements

Fidelity won't accept your sell order? What did they say when you called?

If they won't accept the order, do you have another account to hedge it with?

You can always sell.  If you want to sell, sell.

You'll just get a stern reprimand about whatever violation it was (free ride maybe?), and maybe if you do it again a couple times, you'll have to trade with only settled cash for a quarter (so you would have to wait 3 days after selling to buy with those funds).  

When you sell, the transaction takes 3 days to settle.
When you buy, it also takes 3 days to settle.
If you sell today, and use that "balance" to buy something else, there is no problem at all.
I've been buying/selling/daytrading, using full funds, for over 15 years, never had any issues.

If what you did is a problem for Fidelity, then it's time to find a good broker!

xerty said:   You can always sell.  If you want to sell, sell.

You'll just get a stern reprimand about whatever violation it was (free ride maybe?), and maybe if you do it again a couple times, you'll have to trade with only settled cash for a quarter (so you would have to wait 3 days after selling to buy with those funds).  


Thanks. I just put in the order, fidelity warned of a "good faith violation." If the order executes before settled date, will post update on the consequence.

They won't be coming to your house to arrest you. You might get a restriction on your account in the future. The rules were written to keep (new) customers from free-riding on credit in a cash account. Like keeping winners and DK'ing on a loser. Or free-riding without ever putting up any money on a purchase and subsequent sale. It goes back to the days when stocks settled 5 days later, brokers were all local brick and mortar, and you could pay for cash account trades with a personal check before settlement. Yes, I'm that old

Thanks. Is DKing still a thing?

Also, order executed yesterday (set limit too low, but I guess it could've gone the other way today too so I'll take the gains when I can). Trading profile today indicates 1 good faith violation. Looks like they allow 3 in a 12 month period then they only restrict for 90 days.

jetsfan92588 said:   Thanks. Is DKing still a thing?

Also, order executed yesterday (set limit too low, but I guess it could've gone the other way today too so I'll take the gains when I can). Trading profile today indicates 1 good faith violation. Looks like they allow 3 in a 12 month period then they only restrict for 90 days.

  Not really since retail customers have to put-up the money first. Maybe in an institutional setting where misunderstandings can happen on the phone over terms.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017