90-day restriction on funds --- Anybody heard of this? (Etrade)



Within the past 5 days I made a couple of trades (am not a day trader
so this is the first time I did 2 trades within a week) and the funds
after the 2nd sale were put under 90-day restriction. I hold an account
with Etrade.

How can I avoid such a restriction?

Following is the explanation Etrade offers:
Pursuant to interpretive guidance released by the Board of Governors of
the Federal Reserve System regarding Regulation T, cash account
customers are prohibited from selling securities prior to making full
cash payment for the shares. Customers may use existing cash in the
account, the proceeds from sales of fully-paid-for securities, and
additional deposits of cash to make such payment. Proceeds of sales may
be used for payment of a purchase only on or after the settlement date
of such sales.

In the event where a cash account customer sells a security that has
not been fully-paid for, the account may be restricted for 90 days.
E*TRADE Securities will require settled cash prior to making purchases
in such accounts.

The example below illustrates the type of activity that will result in
an account being placed on a 90-day restriction:

At the beginning of the day, a customer holds 1,000 shares (settled) of
Company X in a cash account. The customer then makes the following
transactions:
The customer sells 1,000 shares of Company X for $25,000.
Using the funds from the sale of Company X, the customer then purchases
2,000 shares of Company Y for $25,000 on the same day.
Before the sale of Company X has settled, the client sells the position
in Company Y and receives $25,000.
In the example above, based on the Federal Reserve Board interpretive
guidance, the customer sold Company Y shares before paying for them.
This would result in the 90-day trading restriction referenced above
being placed on the account.

Restrictions on an account may be avoided if the security that was
purchased is fully-paid for within five business days after the trade
date by:
Depositing enough additional cash into your account to fully fund the
purchase;
Combining accounts to increase the amount of cash available to pay for
the purchase

.



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