4.1.6. Withdrawal of Equity Capital
Back in the 1980s, Drexel Burnham was one of the top ten investment banking firms in the nation. However, amidst insider trading scandals, racketeering charges, and convictions for a variety of SEC violations, the firm declared bankruptcy in 1990. This was not before its parent company withdrew much of the firm’s equity capital, leaving almost nothing to pay its creditors during liquidation. In response, the SEC established new rules regarding when and how much equity capital members are allowed to withdraw.
These rules require firms to provide the SEC with notice when withdrawing certain amounts of funds. The SEC also provides limitations on how much capital may
