Self-regulator Finra is requesting comments from broker-dealer member firms and other parties on planned enhancements to the industry’s continuing education requirements.

The Securities Industry/Regulatory Council on Continuing Education (CE Council) develops the Securities Industry Continuing Education Program (CE Program) or the uniform CE requirements for registered persons of broker-dealer firms.

The council is made up of representatives of the securities industry and securities industry self-regulatory organizations, including Finra.

The CE Program, which has been in place since 1995, is made up of what’s called a Regulatory Element and a Firm Element. The Regulatory Element is administered by Finra and focuses on regulatory requirements and industry standards. The Firm Element is developed and administered by each broker-dealer firm and focuses on securities products, services and strategies offered by each firm.

The CE Council is planning to transition the Regulatory Element program to a shorter and more-focused learning requirement administered annually.

The Regulatory Element currently includes the following four programs:

  • S106 (for investment company and variable contracts representatives)
  • S201 (for registered principals and supervisors)
  • S901 (for operations professionals)
  • S101 (for all other registered persons/general program for Series 7 registered persons).

The CE Council wants the Firm Element to reflect advances in technology and learning theory while continuing to ensure registered persons receive timely education on the securities business and applicable regulatory requirements.

The CE Council is also considering letting individuals maintain their qualification status following the termination of their registrations with their broker-dealer firms.

Finra

Currently, individuals whose registrations have been terminated for two or more years are required to requalify by examination, or obtain a waiver of the examination requirement, to re-register. And individuals whose registrations have been terminated cannot maintain their qualification status beyond the two-year period. The CE Council is considering a mechanism to support regulatory efforts to revise this current rule structure.

Regulatory Element Enhancements Under Consideration

Relevance – Some individuals complete content that is not directly relevant to the registrations they hold or the job roles in which they work. This format is a legacy of technological constraints that no longer exist. The CE Council is exploring methods of restructuring the Regulatory Element program to increase the relevance of content most individuals receive.

Timeliness – Under the current CE Program, individuals complete Regulatory Element content on the second anniversary of their initial registration and every three years thereafter. The current frequency is an obstacle to providing timely regulatory training on impactful rule changes and significant industry regulatory issues. The CE Council is considering moving to an annual Regulatory Element requirement to improve timeliness.

Regulatory Element Systems – The CRD system is the primary industry system for managing Regulatory Element activities. The CE Council has discussed with Finra the possibility of CRD system enhancements to improve functionality and address increased compliance work related to the possible transition of the Regulatory Element program to an annual requirement.

Synergy with Firm Element – The current Regulatory Element and Firm Element programs operate largely independently from one another. This results in duplication between the two programs at some firms. The CE Council believes that firms could better leverage the Regulatory Element as part of their overall training programs if they had a clearer understanding of the specific Regulatory Element content covered each year.

Firm Element Enhancements Under Consideration

CE Council Guidance and Resources – The CE Council is interested in feedback on the value of this resource and other guidance or tools that the CE Council could provide to help firms meet their Firm Element obligations.

Typical Characteristics of Firm Element Programs – Many professions have structured CE programs to maintain professional credentials, including concepts like educational credits or assessment requirements. In contrast, the Firm Element requirement is relatively unstructured. The CE Council is interested in understanding whether most firms rely solely on traditional and electronic courses or if seminars, conferences or other learning activities are also commonly used.

Other Training Requirements and Credentialing Programs – The CE Council is aware that there are several industry training requirements outside the Firm Element program including AML training and an annual compliance meeting required by some regulators. The CE Council seeks feedback on how most firms coordinate these various training requirements and identifying redundancy when it arises.

Access to Firm Element Content – Firms have a variety of options for sourcing Firm Element content. Some firms develop materials internally. Others rely on third-party training providers. The CE Council is interested in feedback on challenges faced in developing or acquiring appropriate content to meet Firm Element requirements.

Separately, SEC Ponders Advisor CE Requirements

In a related development, the SEC is considering whether registered investment advisors should be subjected to continuing education or licensing requirements in the same way that broker-dealers are required. The commission included a request for feedback on this in its proposed Regulation Best Interest package.

FA-IQ asked a few of this year’s Top 300 Financial Times Advisors if they should be subjected to these requirements and if this would benefit investors. Here’s what they had to say:

Michael Weissman, director and investment advisory and principal at Aspiriant: “An emphatic yes for continuing education. It’s such a changing landscape in the financial services industry that I think everybody needs to be focused on continuing education. It’s just getting easier and easier to get good continuing education.”

Steven Check, president at Check Capital Management: “With investment advisors, we’re generally relatively small shops. We have a chief compliance officer. The SEC is putting out, every year, things that they’re focusing on. We’re getting educated internally by our chief compliance officers. We’re getting audited by the SEC. So, I feel that any credible investment advisor is, frankly, doing a lot of self-education anyway and will be checked on, again, by the SEC through audits and so forth. But I don’t think a formal, I guess, reeducation or certification is necessary.”

Robert Case, CEO at Ingalls & Snyder: “I do think that continuing education is an important element of the professionalism of our industry. And as someone who undergoes continuing education – and all of our registered personnel do undergo continuing education at Ingalls & Snyder – I think it would be really beneficial to the RIA profession to have that standard.

Anson Beard, president at Cary Street Partners Investment Advisory: “A first-rate advisor is an educated advisor, and part of that process is ongoing. The industry changes. The regulations associated with the industry constantly change. And I think having advisors that are current, that know the rules of engagement, that know the state of play, is of paramount importance. So, we are a proponent of that, without a doubt.”

Brian Vendig, president and managing executive at MJP Wealth Advisors: “I think education is always beneficial. There are several professional licenses that I have that require continuing education. And I think that is just a good way of monitoring behaviors or helping people being reminded of appropriate behaviors when working with the public. So, I don’t see that adding an element of continuing education as part of being a fiduciary advisor or a broker in the industry should be prohibited. It actually should be encouraged.”