Good faith deposit


Also found in: Acronyms.

Good faith deposit

Used in the context of commodities. Refers to the initial margin account deposit needed when buying or selling a futures contract; approximately 2%-10% of the contract value.
Used in the context of securities to describe the deposit required by securities firms engaged in transactions on behalf of a new client.
Also used to refer to the deposit with a municipal bond issuer by firms competing for the underwriting business.

Good Faith Deposit

1. In municipal bonds, a small amount of money, usually less than 5% of an issue, that underwriters give to the issuer in exchange for the right to place part of the issue. A good faith deposit is a sign that an underwriter has a vested interest in placing the issue and will therefore act vigorously on behalf of the issuer.

2. In securities, a small amount of money from an order that a brokerage requires a new client to deposit in exchange for filling the order. The good faith deposit ensures that the new client is serious about the order and will be likely to settle or make delivery when the time comes. This is done to reduce the risk to the brokerage when it takes a new client. It is also called earnest money.

3. See: Initial margin amount.

good faith deposit

1. A sum of money required of an investor who is placing an order when that investor is not known to the brokerage firm. A good faith deposit ensures that the customer will follow through with proper payment for a buy order or with delivery of securities for a sell order.
2. A sum of money deposited by competing underwriters of a new municipal bond issue. The deposit is a relatively small proportion (usually under 5%) of the value of the issue being underwritten.

Good faith deposit.

A good faith deposit is a sum of money provided by a buyer to a seller, which demonstrates the buyer's intention to purchase.

For instance, if you've decided on a home you want to buy, you generally make a good faith deposit to support your bid.

A good faith deposit, also called a binder or earnest money, is usually a fixed amount that's standard in the community where you're buying. It's different from a down payment. That's a larger cash payment, figured as a percentage of the purchase price, which you make when you sign the contract to purchase the property.

If you and the seller can't agree on the terms of the sale, you generally get your good faith deposit back.

References in periodicals archive ?
By November 18, 2005, NASC is obligated to fulfill the balance of its financing commitments, including an unconditional equity commitment of $350 million, and a letter of credit for $50 million, to increase the initial good faith deposit already paid to BEI of $10 million to a total of $60 million.
If they do, it's generally just a small good faith deposit.
In exchange for the extension of time, NASC has agreed to pay BEI $3 million as an additional initial good faith deposit, which increases the total initial good faith deposit to $10 million.
Wataire received a good faith deposit of US$200,000.
The Agreement provides for a good faith deposit, payment of a break-up fee if Simula accepts a competing offer, and other terms customary for similar transactions.
The LOI provides for a good faith deposit, expedited due diligence, payment of a break-up fee if Simula accepts a competing offer, and other terms customary for similar transactions.
Bidders must deliver sealed bids together with a good faith deposit of 10% of the full purchase price to Tranzon Driggers on or before Monday, October 28, 2002 at 3:00 PM E.
Chaudhuri will loan $10 million to IHHI to be used by IHHI as a good faith deposit towards the Company's proposed acquisition of hospitals from Tenet;
Sutter will make a $1 million good faith deposit into an escrow account designated by Plumtree within five business days of the acceptance by Plumtree of the offer.
The LOI provides for a good faith deposit by Armor Holdings, expedited due diligence, and payment of a break-up fee if Simula accepts a competing offer.
AmeriNet is scheduled to make the second and final $100,000 good faith deposit ($200,000 in the aggregate) required under the terms of the letter of intent this week.