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IV. Financial and Operational Practices [Version up to Mar. 22, 2011]

Customer Confirmations—Failure to Comply With Rule Requirements

SEC Rule 10b-101 and NASD Rule 2230

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Nature and materiality of the inaccurate or missing information.
2. Number of affected confirmations.
First Action

Fine of $1,000 to $5,000.

Second Action

Fine of $5,000 to $10,000.

Subsequent Actions

Fine of $10,000 to $100,000.
Firm

Consider suspending the firm with respect to any or all activities or functions for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or expulsion of the firm.

Individual

Consider suspending the responsible party in any or all capacities for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or a bar.

1 This guideline is also appropriate for violations of MSRB Rule G-15.


Customer Protection Rule—Failure to Comply With Rule Requirements

FINRA Rule 2010 and SEC Rule 15c3-3

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Extent to which the respondent exposed customer funds to potential risk or loss.
Fine of $1,000 to $50,000.

Repeated violations should carry individual fine for Financial Principal and/or responsible supervisor.
Firm

Consider suspending the firm with respect to any or all activities or functions for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or expulsion of the firm.

Individual

Consider suspending the Financial Principal or responsible party in any or all capacities for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or a bar.

Net Capital Violations

FINRA Rule 2010 and SEC Rule 15c3-1

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Whether the firm continued in business while knowing of deficiencies/inaccuracies or voluntarily ceased conducting business because of the deficiencies/inaccuracies.
2. Whether respondent attempted to conceal deficiencies or inaccuracies by any means, including "parking" of inventory and inflating "mark-to-market" calculations.
Fine of $1,000 to $50,000. Firm

Consider suspending the firm with respect to any or all activities or functions for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or expulsion of the firm.

Individual

Consider suspending the Financial Principal or responsible party in any or all capacities for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or a bar.

Recordkeeping Violations

FINRA Rule 2010, NASD Rule 3110 and SEC Rules 17a-3 and 17a-41

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Nature and materiality of inaccurate or missing information.
Fine of $1,000 to $10,000.

In egregious cases, fine of $10,000 to $100,000.
Firm

Consider suspending the firm with respect to any or all activities or functions for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or expulsion of the firm.

Individual

Consider suspending the Financial Principal or responsible party in any or all capacities for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or a bar.

1 This guideline also is appropriate for violations of MSRB Rules G-8 and G-15.


Regulation T and Margin Requirements—Violations of Regulation T and/or FINRA Margin Requirements

Regulation T; Part 220 Issued by the Board of Governors of the Federal Reserve Board; and FINRA Rules 2010 and 4210

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Extent and nature of the respondent's failure to comply.
Fine of $1,000 to $50,000.

Repeated violations should carry an individual fine for the responsible individual.
Firm

Consider suspending the firm with respect to any or all activities or functions for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or expulsion of the firm.

Individual

Consider suspending the responsible individual in any or all capacities for up to 30 business days.

In egregious cases, consider a lengthier suspension (of up to two years) or a bar.

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