Free-riding is when a customer purchases securities, then pays for the cost of those securities by selling them.
Regular-way settlement for equity trades is 3 business days. If you try to open and close a position using unsettled funds, you may be required to deposit additional funds (in response to a margin call).
An account with a free-riding violation will be subject to trading restriction and purchasing securities only when sufficient settled cash is in the account at the time of purchase. A free-riding restriction is effective for 90 days.