What is a “Friendly Loan” used to cover a Day Trading Buying Power Call?
Until the Day Trading Buying Power Call is met by depositing cash, the account remains restricted, pursuant to NASD Rule 2520(iv)(c). Pursuant to NASD Rule 2520(iv)(e) the cash must be deposited and cannot be withdrawn for a minimum of two business days following the close of business on the day of deposit. Here’s where the “friendly loan” comes into play: Some boutique brokerages have been known to look the other way when an “arrangement” is made between two of their customers to transfer funds from an unrestricted account, into the account with the Day Trading Buying Power Call. Similarly there are “angels” who, for a reasonable fee, will lend the cash for a few days to accounts to meet their Day Trading Buying Power Call. If discovered, such “friendly loans” may be subject to NASD disciplinary action under NASD Rule 2370. You can legitimately accomplish nearly the same thing by taking out an advance on a home equity line of credit, or a cash advance on a Mastercard/VISA. update 2005
