On episode 84 of the CCO Buzz podcast, we discuss the new NASAA Model Rule on Continuing Education Requirements for Investment Adviser Representatives.
CCO Buzz: Hello and welcome back to the CCO Buzz. On today’s episode we’re joined by Core Compliance’s very own Compliance Consultant and Compliance Analyst. They’re with us today to discuss their latest article that is due to come out later this month, which covers the new NASAA Model Rule on Continuing Education Requirements for Investment Adviser Representatives. As this update came towards the end of 2020, many firms are still finding methods and best practices to adjust to the new guidance.
And what better time than Q1 of a new year, to onboard ample training and education- so with that, let’s begin.
Actually, before we jump in – is the latest team member to join the Core Compliance team- do you mind sharing a little about yourself with the CCO Buzz listeners?
Core Compliance: Not at all. Hello everyone. My name is and I joined the Core Compliance team as a Compliance Consultant earlier this year. I’m a former securities regulator with direct insight and experience in the compliance space. In my previous experience I served as a Financial Examiner with the Texas State Securities Board in the Inspection & Compliance Division, where I conducted audits and investigations of registered broker-dealers and investment advisers. I have also served as a specialist in the Investor Education Program at the Texas State Securities Board. I am excited and eager to support the Core Compliance team as they continue to be an asset and an influence to the compliance industry.
CCO Buzz: Don’t be too shy, give yourself more credit. Listeners, he has over a decade of experience in the industry, and his consultation efforts focus on annual reviews, risk assessments, compliance program development and policy and procedure strategy, design and implementation. He also assists our clients with regulatory exams, including preparation, document production and response efforts. So with that, welcome to the team!
But back to the subject at hand – Gentlemen, would either of you mind providing our listeners with a bit of background to the NASAA Model Rule?
Core Compliance: Of course. The North American Securities Administrators Association (“NASAA”) recently adopted a new model rule on Investment Adviser Representative (“IAR”) requirements for Continuing Education (“CE”). The new model rule states any IAR registered under Section 404 of the 2002 Act (or 201 of the 1956 Act) is subject to the NASAA CE requirements during a given Reporting Period.
The new CE requirement is intended to ensure IARs’ knowledge base and level of competence remains up to date. Other financial professionals – such as financial planners, real estate agents, and insurance agents – have CE requirements, and considering the IARs’ fiduciary responsibilities to their clients, as well as the ever-changing landscape of the securities industry, the new model rule will help IARs maintain a great level of competence on behalf of their clients’ financial needs.
CCO Buzz: Interesting, can you elaborate on what the CE requirements are according to this new guidance?
Core Compliance: Of course. The model rule has two components to cover products and practices, as well as ethics. IARs are free to choose the courses to fulfill the CE requirements so long as the content meets the credit requirements, and the CE course provider is approved by NASAA.
Now currently, any vendor, broker-dealer, investment adviser, or state may apply with their CE course material for approval by NASAA to be considered an approved CE course. NASAA will partnering with Prometric to standardize the content and estimates that the CE program and materials will be approved and available by the end of the second quarter of 2021.
Core Compliance: Yes, and beginning in 2022, any IAR registered in a jurisdiction that has adopted the model rule will be subject to the 12 Continuing Education credit requirements, of which 6 must be Products and Practices and 6 must be Ethics and Responsibilities. Newly registered IARs will not be required to fulfill the full 12 credit requirement in the calendar year in which they are registered, but will be subject to the Continuing Education requirement in the next full calendar year. Any Continuing Education credits earned in excess of the requirement will not carryover to the next reporting period.
CCO Buzz: That’s something to consider as I’m pretty sure those in the industry will want to carefully plan to ensure not to go over, but to also be mindful of the latest educational opportunities available to stay competitive. But what happens if an IAR changes firms, misses the credit requirements, or terminates registration?
Core Compliance: That’s an excellent consideration, especially in today’s fluid market. But from my understanding, any CE credits earned and reported will be reflected in the IAR’s course transcript on CRD and IARD, so if an IAR moves to another firm, the CE credits earned prior to re-registering with another firm will still apply towards the annual requirement. However if an IAR does not meet the required 12 CE credits for the year, all credits earned in the following year will have to apply to the previous year’s deficiency until the requirement is met.
For example, if only 9 credits are earned and reported in 2022, then the first 3 credits earned in 2023 will have to apply to the 2022 credit requirements instead of 2023. So likewise, if an IAR terminates their registration and seeks to become re-registered within the two-year exam window, they will have to complete the CE requirements for each year they missed before becoming re-registered. However, in lieu of taking the CE courses, the IAR may re-take the Series 65 or 66 to satisfy the requirement.
CCO Buzz: Wow, that’s a bit consider as movement, jumps, and career moves are expected in any adviser’s professional journey. But what about instances where they’re registered in multiple states?
Core Compliance: We can’t give everything away in this episode. I think it’s best if listeners wait for the release of our article in the coming days, don’t you think so?
Core Compliance: I agree, there are multiple factors to be considered- especially when it may impact registration renewals. But again, if the listeners want more insight, they can always reach out to the Core Compliance team for added insight or guidance on how to navigate this semi-new requirement. If you’d like any additional information or to discuss your own firm’s approach to CE credits, please don’t hesitate to reach out to the Core Compliance team at (619) 278.0020 or at www.corecls.com.
CCO Buzz: Well, there you have it listeners – if you want to know more, I guess we’ll have to wait for this month’s Core Compliance Risk Management Update. Thank you for joining us today, gentlemen.
Well that’s it for this week’s episode. If you’d like additional information, please check out our website at www.corecls.com. You can also follow us on Facebook, LinkedIn, or Twitter @CoreCls. Thank you, and we hope you tune-in to next week’s episode of the CCO Buzz.