2330. Customers' Securities or Funds
This rule is no longer applicable. NASD Rule 2330 has been superseded by FINRA Rules 2150 and 4330. Please consult the appropriate FINRA Rules.
(a) Improper Use
No member or person associated with a member shall make improper use of a customer's securities or funds.
(b) General Provisions
Every member in the conduct of its business shall adhere to the provisions of SEC Rule 15c3-3 under the Act with respect to obtaining possession and control of securities, and the maintenance of appropriate cash reserves. For the purposes of this Rule, the definitions contained in Rule 15c3-3 shall apply.
(c) Authorization to Lend
No member shall lend, either to himself or to others, securities carried for the account of any customer, which are eligible to be pledged or loaned unless such member shall first have obtained from the customer a written authorization permitting the lending of securities thus carried by such member.
(d) Segregation and Identification of Securities
No member shall hold securities carried for the account of any customer which have been fully paid for or which are excess margin securities unless such securities are segregated and identified by a method which clearly indicates the interest of such customer in those securities.
Cross Reference–
"Hypothecation of Customers' Securities" — See SEC Rules and Regulation T Tab
(e) Prohibition Against Guarantees
No member or person associated with a member shall guarantee a customer against loss in connection with any securities transaction or in any securities account of such customer.
(f) Sharing in Accounts; Extent Permissible
(1)(A) Except as provided in paragraph (f)(2) no member or person associated with a member shall share directly or indirectly in the profits or losses in any account of a customer carried by the member or any other member; provided, however, that a member or person associated with a member may share in the profits or losses in such an account if (i) such person associated with a member obtains prior written authorization from the member employing the associated person; (ii) such member or person associated with a member obtains prior written authorization from the customer; and (iii) such member or person associated with a member shares in the profits or losses in any account of such customer only in direct proportion to the financial contributions made to such account by either the member or person associated with a member.
(B) Exempt from the direct proportionate share limitation of paragraph (f)(1)(A)(iii) are accounts of the immediate family of such member or person associated with a member. For purposes of this Rule, the term "immediate family" shall include parents, mother-in-law or father-in-law, husband or wife, children or any relative to whose support the member or person associated with a member otherwise contributes directly or indirectly.
(2) Notwithstanding the prohibition of paragraph (f)(1), a member or person associated with a member that is acting as an investment adviser (whether or not registered as such) may receive compensation based on a share in profits or gains in an account if (i) such person associated with a member seeking such compensation obtains prior written authorization from the member employing the associated person; (ii) such member or person associated with a member seeking such compensation obtains prior written authorization from the customer; and (iii) all of the conditions in Rule 205-3 of the Investment Advisers Act of 1940 (as the same may be amended from time to time) are satisfied.
| Amended by SR-FINRA-2009-014 eff. Dec. 14, 2009. Amended by SR-NASD-84-33 eff. Feb. 7, 1985. Selected Notices: 83-74, 09-60. |