FINRA shut down Gunn Allen Financial Monday morning for failing to meet net capital requirements. The Tampa-based independent b/d, which has had a history of legal and regulatory trouble, was warned on Friday that it would have to cease operations if it didn’t shore up its capital over the weekend.

A spokesperson for GunnAllen confirmed the firm was not trading on behalf of customers and is restricted to liquidating trades, but noted that client assets are safely held at third party custodian Ridge Clearing and Outsourcing Solutions in Jersey City.

Is that it for the b/d? GunnAllen could apply to get its license reinstated if it can get adequate funding in the next few days, says Securities Attorney, Jacob Zamanksy. But if FINRA has specific concerns about the firm, it might also impose higher net capital requirements than those already required by the SEC. A FINRA spokesman declined to comment.

In the meantime, it may not have many financial advisors left a few days from now. Some reports say as few as 400 financial advisors were left at the firm as of last week. That’s down from around 700 at the end of 2008, Aite Group analyst Douglas Dannemiller estimates. Gunn Allen has been through extensive management upheaval in recent months, as the largest stakeholder in the firm and chairman of the board, John H. Sykes, as well as several company directors resigned abruptly in early December, 2009.

“I think for a firm that has been dealing with a lot of negative publicity and internal disruption, being shut down by FINRA is a last straw, and for advisors loyalty only goes so far,” says industry consultant Dennis Gallant, president of GDC Research. Those who haven’t been picked over by recruiters, might get scooped up in a fire sale if a buyer comes along, he speculates. But Dannemiller sees a sale as unlikely. “Why would I buy firm when I know I can get the reps I want out of it? I mean there is no value in the brand whatsoever,” says Dannemiller.

One former GunnAllen manager with one of the b/d’s top producing branches says his branch left the firm this year because of all the headline risk they were dealing with, which he says became a distraction for customers and FAs. “It was difficult decision because we were at firm almost eight years,” says the former GunnAllen rep. It appeared the firm was getting its act together a few years ago, he says, but then along came Frank Bluestein, a top producer with $1 billion in assets, who was terminated from the firm in October 2007. “It’s unfortunate that what happened appeared to be triggered by one rep, and culminated in the firm going out of business.”

Bluestein was under investigation by Michigan state regulators and the Securities and Exchange Commission for his alleged involvement in a $250 million fraudulent scheme involving senior citizens. At the time of his termination Bluestein’s CRD revealed 10 customer disputes logged against him totaling approximately $1.57 million in alleged damages.

It remains to be seen what will happen to GunnAllen. Gallant says the question right now is, “when a small firm losses capital requirements do they recover?” Compliance and stability will be a big issue for all advisors going forwards says Gallant. “You might be running best compliance in your practice as possible, but if they’re not watching what other reps are doing, a bad rep on the other side of the country could blow up the whole firm and you go down with it.” GunnAllen’s CRD shows 17 regulatory events and 11 arbitrations.

Some recruiters and analysts compare GunnAllen’s failure to the epic failure of Brookstreet Securities.