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9557. Procedures for Regulating Activities Under Rules 3130 and 3131 Regarding a Member Experiencing Financial or Operational Difficulties
This rule is no longer applicable. NASD Rule 9557 has been superseded by FINRA Rule 9557. Please consult the appropriate FINRA Rule.
(a) Notice of Restriction
NASD staff may issue a notice directing a member to restrict its business activities, either by limiting or ceasing to conduct those activities, if NASD staff has reason to believe that a condition specified in Rule 3130 or Rule 3131 exists.
(b) Service of Notice
NASD staff shall serve the member subject to a notice issued under this Rule by facsimile, overnight courier or personal delivery. Papers served on a member by overnight courier or personal delivery shall conform to paragraphs (a)(1) and (3) and (b)(2) of Rule 9134. Papers served on a member by facsimile shall be sent to the facsimile number listed in the member's contact questionnaire submitted to NASD pursuant to Article 4, Section III of NASD's By-Laws, except that, if NASD staff has actual knowledge that an entity's contact questionnaire facsimile number is out of date, duplicate copies shall be sent to the entity by overnight courier or personal delivery in conformity with paragraphs (a)(1) and (3) and (b)(2) of Rule 9134. Service is complete upon sending the notice by facsimile, mailing the notice by overnight courier or delivering it in person, except that, where duplicate service is required, service is complete upon sending the duplicate service.
(c) Contents of Notice
A notice issued under this Rule shall state the specific grounds and include the factual basis for the NASD action. The notice shall state when the NASD action will take effect and explain what the respondent must do to avoid such action. The notice shall state that the respondent may file a written request for a hearing with the Office of Hearing Officers pursuant to Rule 9559. The notice also shall inform the respondent of the applicable deadline for filing a request for a hearing and shall state that a request for a hearing must set forth with specificity any and all defenses to the NASD action. In addition, the notice shall explain that, pursuant to Rules 8310(a) and 9559(n), a Hearing Officer or, if applicable, Hearing Panel, may approve, modify or withdraw any and all sanctions or limitations imposed by the notice, and may impose any other fitting sanction.
(d) Effective Date of Restriction
The restrictions referenced in a notice issued and served under this Rule shall become effective seven days after service of the notice, unless stayed by a request for a hearing pursuant to Rule 9559.
(e) Request for a Hearing
A member served with a notice under this Rule may file with the Office of Hearing Officers a written request for a hearing pursuant to Rule 9559. A request for a hearing shall be made before the effective date of the notice, as indicated in paragraph (d) of this Rule. A request for a hearing must set forth with specificity any and all defenses to the NASD action.
(f) Failure to Request Hearing
If a member does not timely request a hearing, the restrictions specified in the notice shall become effective seven days after service of the notice. The restrictions specified in the notice shall remain in effect until the head of the NASD department or office that issued the notice or, if another NASD department or office is named as the party handling the matter on behalf of the issuing department or office, the head of the NASD department or office that is so designated reduces or removes the restrictions pursuant to paragraph (h) of this Rule.
(g) Order to Enforce Sanctions
If NASD staff determines that a member has failed to comply with any restrictions imposed by a decision or an effective notice under this Rule that have not been stayed, NASD staff shall issue an order imposing the sanctions set forth in the decision or notice and specifying the effective date and time of such sanctions. The order shall inform the member that it may apply for relief from the sanctions imposed by the order by filing a written request for a hearing before the Office of Hearing Officers under Rule 9559. The procedures delineated in this Rule shall be applicable.
(h) Additional Restrictions or the Reduction or Removal of Restrictions
(1) Additional Restrictions
If a member continues to experience financial or operational difficulty specified in Rule 3130 or 3131, notwithstanding an effective notice, order or decision under this Rule, NASD Staff may impose additional restrictions by issuing a notice under paragraph (b) of this Rule. The notice shall inform the member that it may apply for relief from the additional restrictions by filing a written request for a hearing before the Office of Hearing Officers under Rule 9559. The procedures delineated in this Rule shall be applicable to such a notice.
(2) Reduction or Removal of Restrictions
If NASD staff determines that any restrictions previously imposed under this Rule should be reduced or removed, NASD staff shall serve a written notice on the member pursuant to Rule 9134.
(i) Notice to Membership
NASD shall provide notice of any final NASD action taken pursuant to this Rule in the next Notice to Members Disciplinary and Other NASD Action Section.
Adopted by SR-NASD-2003-110 eff. June 28, 2004.
Selected Notice: 04-36.