A type of brokerage account that requires the client (the investor) to pay the full amount for securities purchased. An investor through a cash account cannot borrow funds from the broker maintaining the account for partial payment of the securities to be traded using the account. In other words, trading on margin (margin trading) is not possible using a cash account.

In a cash account, an investor must pay the full price of securities purchased before being able to selling the same in the market. If an investor buys and sells a security before paying the price, the investor is said to be “freeriding” which is not allowed under exchange regulations and disciplinary action varies from an exchange to another. In certain situations, a broker may have to suspend trading in the investor’s cash account for 90 days. During suspension period, an investor may still purchase securities using the cash account, but the full amount for any purchase must be paid by the broker on the date of each and every transaction.