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4130. Regulation of Activities of Section 15C Members Experiencing Financial and/or Operational Difficulties

(a) Application - For purposes of this Rule, the term "member" shall be limited to any member of FINRA registered with the SEC pursuant to Section 15C of the Exchange Act that is not designated to another self-regulatory organization by the SEC for financial responsibility pursuant to Section 17 of the Exchange Act and SEA Rule 17d-1.
(b) Each member subject to Section 402.2 of the rules of the Treasury Department shall comply with the capital requirements prescribed therein and with the provisions of this Rule.
(c) A member, when so directed by FINRA shall not expand its business during any period in which:
(1) Any of the following conditions continue to exist for more than 15 consecutive business days:
(A) the member's liquid capital is less than 150 percent of the total haircuts or such greater percentage thereof as may from time to time be prescribed by FINRA;
(B) the member's liquid capital minus total haircuts is less than 150 percent of its minimum dollar capital requirement; or
(C) the deduction of ownership equity and maturities of subordinated debt scheduled during the next six months would result in any one of the conditions described in (A) or (B) of this subparagraph (1); or
(2) FINRA restricts the member for any other financial or operational reason.
(d) A member, when so directed by FINRA, shall forthwith reduce its business:
(1) To a point at which the member would not be subject to a prohibition against expansion of its business as set forth in paragraphs (c)(1)(A), (B), or (C) of this Rule if any of the following conditions continue to exist for more than 15 consecutive business days:
(A) the member's liquid capital is less than 125 percent of total haircuts or such greater percentage thereof as may from time to time be prescribed by FINRA;
(B) the member's liquid capital minus total haircuts is less than 125 percent of its minimum dollar capital requirement; or
(C) the deduction of ownership equity and maturities of subordinated debt scheduled during the next six months would result in any one of the conditions described in (A) or (B) of this subparagraph (1); and
(2) As required by FINRA when it restricts a member for any other financial or operational reason.
(e) A member shall suspend all business operations during any period of time when the member is not in compliance with applicable liquid capital requirements as set forth in Section 402.2 of the rules of the Treasury Department. FINRA staff may issue a notice to such member directing it to suspend all business operations; however, the member's obligation to suspend all business operations arises from its obligations under Section 402.2 of the rules of the Treasury Department and is not dependent on any notice that may be issued by FINRA staff.
(f) Any notice directing a member to limit or suspend its business operations shall be issued by FINRA staff pursuant to Rule 9557.
Amended by SR-FINRA-2008-067 eff. Feb. 8, 2010.
Amended by SR-NASD-2003-110 eff. June 28, 2004.
Amended by SR-NASD-2003-74 eff. Dec. 1, 2003.
Adopted by SR-NASD-95-39 eff. Oct. 10, 1996.

Selected Notices: 03-67, 04-36, 09-71.

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