As with many new regulations, the North American Securities Administrators Association Model Rule on Investment Adviser Representative Continuing Education is generating a number of questions. In an effort to streamline responses, here are the answers to the questions I've been asked most frequently regarding the new IAR CE requirements for 2022.
Investment adviser representatives are required to complete 12 CE credits annually to maintain their IAR registration. The requirement includes six credits of products and practices content and six credits of ethics and professional responsibility content.
An IAR who’s also a registered representative of a Financial Industry Regulatory Authority Inc. member firm and in compliance with Finra’s Regulatory Element CE requirements is considered to be in compliance with the requirement to complete six credits of products and practices content. In other words, these IARs are only required to complete the six credits of ethics and professional responsibility content.
Probably the better question to ask is, “Why haven’t IARs had CE requirements before now?” Most financial professionals are required to complete ongoing learning to protect themselves and their clients.
Research shows that in 2020, the amount of assets under management totaled $110 trillion. Much of this money can be attributed to the retirement savings of millions of Americans. This has resulted in the rapid expansion of the investment advisory profession.
In fact, the number of registered investment advisers increased by 50% from 2013 to 2020. All of these factors point to an opportunity and a need to support the important role that IARs play in their clients’ financial lives. The acquisition of knowledge in the form of continuing education is just one way to support IARs.
Compliance starts with current and newly registered IARs in states that have adopted the model rule with an effective date of Jan. 1, 2022. The rule applies to all registered IARs of both state-registered and federal covered investment advisers.
As of April, nine states have either implemented an IAR CE requirement or have informed NASAA’s IAR CE committee they are planning to adopt an IAR CE requirement. The states of Maryland, Mississippi and Vermont have an effective date of Jan. 1, 2022. The states of Michigan, Wisconsin and Kentucky have an effective date of Jan. 1, 2023, and Arkansas, Nevada and Washington, D.C., have a planned effective date of Jan. 1, 2023. For any state that approves the model rule in 2022, the effective date will be Jan. 1, 2023. Since this information will be continuously updated, I strongly recommend checking with the NASAA website for the latest updates. For questions regarding your state’s requirements, contact the securities regulator in your area.
One difference is in the reporting of course completion. Approved providers of IAR CE are required to report completions directly to Finra — NASAA’s vendor for program tracking. A second difference is in the testing. For successful completion, IARs are required to score 100% on an end-of-course assessment and are provided with an unlimited number of attempts to achieve this score.
Yes. A firm is able to leverage its Finra Firm Element training as long as its courses are also approved for IAR CE. Additionally, some IAR CE courses may even qualify for CE for certain professional designations (such as CFP).
Currently, there are no penalties for taking extended time to complete courses or for needing multiple attempts to pass the assessment. However, for IARs who fail to complete the required training by the annual deadline, CRD and Investment Adviser Public Disclosure will set their IAR status as CE inactive and this designation will then appear in the IAPD and in BrokerCheck. Although these IARs can continue to do business, if IAR CE is not completed by the end of following year, the IARs will be unable to renew their registration.
Course options vary by continuing education providers and not all providers have received course approvals. As an approved provider, Securities Training Corp. currently offers 20 courses, as well as both six-hour and 12-hour bundles.
If you have other questions that need answers, NASAA created a Master FAQ to address many additional logistical questions and detailed scenarios. Now is the time to prepare for this new requirement.
Todd Rosenfeld is chief learning officer at Securities Training Corp., which provides training for the financial services industry.
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