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3130. Regulation of Activities of Members Experiencing Financial and/or Operational Difficulties


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This rule is no longer applicable. NASD Rule 3130 has been superseded by FINRA Rules 4110, 4120, and 4140. Please consult the appropriate FINRA Rules.

(a) Application — For the purposes of this Rule, the term "member" shall be limited to any NASD member that is not designated to another self-regulatory organization by the Commission for financial responsibility pursuant to Section 17 of the Act and SEC Rule 17d-1 thereunder. Further, the term shall not be applicable to any member that is subject to Rule 3131.
(b) Each member subject to SEC Rule 15c3-1 shall comply with the net capital requirements prescribed therein and with the provisions of this Rule.
(c) A member, when so directed by NASD, shall not expand its business during any period in which:
(1) Any of the following conditions continue to exist, or have existed, for more than 15 consecutive business days:
(A) A firm's net capital is less than 150 percent of its net capital minimum requirement or such greater percentage thereof as may from time to time be prescribed by NASD;
(B) If subject to the aggregate indebtedness requirement under SEC Rule 15c3-1, a firm's aggregate indebtedness is more than 1,000 per centum of its net capital;
(C) If, in lieu of paragraph (c)(1)(B) above, the specified percentage of the aggregate debit items in the Formula for Determination of Reserve Requirements for Brokers and Dealers under SEC Rule 15c3-3 (the alternative net capital requirement) is applicable, a firm's net capital is less than 5 percent of the aggregate debit items thereunder; or
(D) The deduction of capital withdrawals including maturities of subordinated debt scheduled during the next six months would result in any one of the conditions described in subparagraph (A), (B) or (C).
(2) NASD restricts the member for any other financial or operational reason.
(d) A member, when so directed by NASD, 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 paragraph (c)(1)(A), (B) or (C) of this Rule if any of the following conditions continue to exist, or have existed, for more than 15 consecutive business days:
(A) A firm's net capital is less than 125 percent of its net capital minimum requirement or such greater percentage thereof as may from time to time be prescribed by NASD;
(B) If subject to the aggregate indebtedness requirement under SEC Rule 15c3-1, a firm's aggregate indebtedness is more than 1,200 per centum of its net capital;
(C) If, in lieu of paragraph (d)(1)(B) above, the specified percentage of the aggregate debit items in the Formula for Determination of Reserve Requirements for Brokers and Dealers, under SEC Rule 15c3-3 (the alternative net capital requirement) is applicable, a firm's net capital is less than 4 percent of the aggregate debit items thereunder; or
(D) If the deduction of capital withdrawals including maturities of subordinated debt scheduled during the next six months would result in any one of the conditions described in paragraph (d)(1)(A), (B) or (C) of this Rule.
(2) As required by NASD 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 net capital requirements as set forth in SEC Rule 15c3-1. NASD 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 SEC Rule 15c3-1 and is not dependent on any notice that may be issued by NASD staff.
(f) Any notice directing a member to limit or suspend its business operations shall be issued by NASD staff pursuant to Rule 9557.
Amended by SR-NASD-2003-110 eff. June 28, 2004.
Amended by SR-NASD-2003-74 eff. Dec. 1, 2003.
Amended by SR-NASD-95-39 eff. Oct. 10, 1996.
Adopted by SR-NASD-83-21 eff. Feb. 17, 1984.

Selected Notices: 84-21, 85-89, 03-67, 04-36.

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