Conduct and Practices Handbook Course (CPH) Quiz 32

In the FINRA Rule 1017, in rendering a decision on an application requesting the modification or removal of a membership agreement restriction, the Department shall consider whether maintenance of the restriction is appropriate in light of the following:-

(a) In light of the standards set forth in Rule 1014.
(b) In light of the circumstances that gave rise to the imposition of the restriction.
(c) In light of the Applicant’s operations since the restriction was imposed.
(d) In light of any change in ownership or control or supervisors and principals.
(e) In light of any new evidence submitted in connection with the application.

The Department shall serve a written decision on the application within 30 days after the conclusion of the membership interview or the filing of additional information or documents, whichever is later.

In the FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), if the Department does not require the Applicant to participate in a membership interview or request additional information or documents, the Department shall serve a written decision within 45 days after the filing of the application.

In the FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), if the Department does not require the Applicant to participate in a membership interview or request additional information or documents, the Department shall serve a written decision within 45 days after the filing of the application.

If the Department fails to serve a decision within 180 days after the filing of an application or such later date as the Department and the Applicant have agreed in writing, the Applicant may file a written request with the FINRA Board requesting that the FINRA Board direct the Department to issue a decision.

If the Department fails to serve a decision within 180 days after the filing of an application or such later date as the Department and the Applicant have agreed in writing, the Applicant may file a written request with the FINRA Board requesting that the FINRA Board direct the Department to issue a decision.

Within seven days after the filing of a written request by the applicant to the FINRA Board, the FINRA Board shall direct the Department to issue a written decision immediately or to show good cause for an extension of time.

In the FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), If the Department shows good cause for an extension of time, the FINRA Board may extend the time limit for issuing a decision by not more than 30 days.

In the FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), an Applicant may file a written request for review of the Department’s decision with the National Adjudicatory Council pursuant to Rule 1015.

In the FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), If an application for approval of a change in ownership lapses, or is denied and all appeals are exhausted or waived. The member should take the following action within no more than 60 days after the lapse or exhaustion or waiver of appeal:-

(a) The member should submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws.
(b) The member should unwind the transaction.
(c) The member should file a Form BDW.

In the FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), If an application for approval of a change in ownership lapses, or is denied and all appeals are exhausted or waived. The member should take the following action within no more than 60 days after the lapse or exhaustion or waiver of appeal.

When necessary for the protection of investors or in the public interest, FINRA may, at any time or from time to time with respect to a particular carrying or clearing member or all carrying or clearing members, pursuant to the authority exercised by FINRA’s Executive Vice President charged with oversight for financial responsibility, or his or her written officer delegate, prescribe greater net capital or net worth requirements than those otherwise applicable, including more stringent treatment of items in computing net capital or net worth, or require such member to restore or increase its net capital or net worth. In any such instance, FINRA shall issue a notice pursuant to Rule 9557.

In the FINRA Rule 4110 (Capital Compliance), unless otherwise permitted by FINRA, a member shall suspend all business operations during any period in which it is not in compliance with applicable net capital requirements set forth in SEA Rule 15c3-1.

FINRA may issue a notice pursuant to Rule 9557 directing a member that is not in compliance with applicable net capital requirements set forth in SEA Rule 15c3-1 to suspend all or a portion of its business.

In the FINRA Rule 4110 (Capital Compliance), no equity capital of a member may be withdrawn for a period of one year from the date such equity capital is contributed, unless otherwise permitted by FINRA in writing.

In the FINRA Rule 4110 (Capital Compliance), no equity capital of a member may be withdrawn for a period of one year from the date such equity capital is contributed, unless otherwise permitted by FINRA in writing.

In the FINRA Rule 4110 (Capital Compliance), A carrying or clearing member shall not, without the prior written approval of FINRA, withdraw capital, pay a dividend or effect a similar distribution that would reduce such member’s equity, or make any unsecured advance or loan to a stockholder, partner, sole proprietor, employee or affiliate, where such withdrawals, payments, reductions, advances or loans in the aggregate, in any 35 rolling calendar day period, on a net basis, exceeds 10% of its excess net capital.

In the FINRA Rule 4110 (Capital Compliance), no carrying or clearing member shall consummate a sale-and-leaseback arrangement with respect to any of its assets, or a sale, factoring, or financing arrangement with respect to any unsecured accounts receivable, where any such arrangement would increase the member’s tentative net capital by 10% or more, without the prior written authorization of FINRA.

In the FINRA Rule 4110 (Capital Compliance), no carrying or clearing member shall consummate a sale-and-leaseback arrangement with respect to any of its assets, or a sale, factoring, or financing arrangement with respect to any unsecured accounts receivable, where any such arrangement would increase the member’s tentative net capital by 10% or more, without the prior written authorization of FINRA.

In the FINRA Rule 4110 (Capital Compliance), no carrying member shall consummate any arrangement concerning the sale or factoring of customer debit balances, irrespective of the amount, without the prior written authorization of FINRA.

In the FINRA Rule 4110 (Capital Compliance), all subordinated loans or notes collateralized by securities shall meet such standards as FINRA may require to ensure the continued financial stability and operational capability of the member.

In the FINRA Rule 4110 (Capital Compliance), unless otherwise permitted by FINRA, each member partnership whose general partner enters into any secured or unsecured borrowing, the proceeds of which will be contributed to the capital of the member, shall submit the following for approval in order for such proceeds to qualify as capital acceptable for inclusion in the computation of the net capital of the member:-

(a) A signed copy of the loan agreement which must have at least a 12-month duration.
(b) A signed copy of the loan agreement which must provide non-recourse to the assets of the member.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), In any event within 24 hours each carrying or clearing member shall promptly notify FINRA in writing if its net capital falls below the 150 percent of its minimum dollar net capital requirement or such greater percentage thereof as may from time to time be designated by FINRA.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), In any event within 24 hours each carrying or clearing member shall promptly notify FINRA in writing if its net capital falls below the 150 percent of its minimum dollar net capital requirement or such greater percentage thereof as may from time to time be designated by FINRA.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), In any event within 24 hours each carrying or clearing member shall promptly notify FINRA in writing if the member is registered as a Futures Commission Merchant pursuant to the Commodity Exchange Act, and its net capital is less than 120% of the minimum risk-based capital requirements of Commodity Exchange Act Rule 1.17.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), Except as otherwise permitted by FINRA in writing, a member that carries customer accounts or clears transactions shall not expand its business during any period in which if the condition of member’s net capital is less than 150 percent of its minimum dollar net capital requirement continue to exist for more than 15 consecutive business days, provided that such condition has been known to FINRA or the member for at least five consecutive business days. FINRA may issue a notice pursuant to Rule 9557 directing any such member not to expand its business.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), Except as otherwise permitted by FINRA in writing, a member that carries customer accounts or clears transactions shall not expand its business during any period in which if the condition of member’s net capital is less than 150 percent of its minimum dollar net capital requirement continue to exist for more than 15 consecutive business days, provided that such condition has been known to FINRA or the member for at least five consecutive business days. FINRA may issue a notice pursuant to Rule 9557 directing any such member not to expand its business.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), No member may expand its business during any period in which FINRA restricts the member from expanding its business for any financial or operational reason.

In the FINRA Rule 4120 (Regulatory Notification and Business Curtailment), the following explains the term “expansion of business” for the purpose of restrictions on business expansion:-

(a) Net increase in the number of registered representatives or other producing personnel.
(b) Exceeding average capital commitments over the previous three months for market making or block positioning.
(c) Initiation of market-making in new securities or any new proprietary trading or other commitment in securities or commodities in which a market is not made (other than riskless trades associated with customer orders).
(d) Exceeding average commitments over the previous three months for underwritings.
(e) Opening of new branch offices.
(f) Entering any new line of business or deliberately promoting or expanding any present lines of business.
(g) Making unsecured or partially secured loans, advances, drawings, guarantees or other similar receivables.
(h) Such other activities as FINRA deems appropriate under the circumstances, in the public interest or for the protection of investors.

In the FINRA Rule 4150 (Guarantees by, or Flow-through Benefits for, Members), prior written notice shall be given to FINRA whenever any member guarantees, endorses or assumes, directly or indirectly, the obligations or liabilities of another person.