Independent Broker Dealer Consortium

New Education Requirements on the Horizon for Broker Dealers and (Maybe) Investment Advisers

FINRA is seeking input on proposed changes to the Securities Industry Continuing Education Program (“CE Program”) just as the SEC is considering responses to its request for comments on whether investment advisers should be subject to similar obligations. Here are the latest developments.


FINRA requested comment from member firms and other interested parties on enhancements to the CE Program proposed by the Securities Industry/Regulatory Council on Continuing Education (“CE Council”). The CE Council, made up of representatives of the securities industry (including SROs like FINRA), develops uniform continuing education requirements for more than 600,000 securities professionals to ensure they “have the knowledge and skills necessary to help investors and promote the integrity of the U.S. capital markets.” In issuing their proposed enhancements, the CE Council described the “increasing complexity of products and services offered through the U.S. financial markets” and the consequent need to provide timely, effective training to registered persons


The CE program is made up of a Regulatory Element and a Firm Element. The Regulatory Element is intended to address new rules and industry standards to “educat[e] registered persons on significant regulatory issues facing the industry.” Proposed enhancements to the Regulatory Element include (i) narrowing the program by creating “targeted learning units” that are more relevant to the registrations held by individuals. The Council is also proposing to make the Regulatory element more timely by (ii) making it an annual requirement rather than every three years (after the second anniversary of an initial registration). Finally, the Council suggests that there are additional efficiencies to be gained by (iii) improving the functional aspects of element systems (notably, the Central Registration Depositary “CRD” and “Financial Professional Gateway”) and by (iv) coordinating the modular approach for the Regulatory Element with the requirements of the Firm Element.


The Firm Element program addresses “products, services and strategies offered by the firm as well as firm policies and industry trends.” The CE Council proposed fewer Firm Element enhancements, but asked for more feedback. Specifically, the Council asked for information (i) on the value of the current guidance it provides to help firms meet their obligations; (ii) on current firm education practices (including those containing content outside the CE Program like AML training); (iii) on redundancies or “opportunities for reciprocity with other securities or related credential programs;” and (iv) on how firms develop or acquire the content to meet Firm Element requirements. FINRA reminded its members that should the CE Council recommend program changes, FINRA would issue the requisite Notice with the specific details and any related rule changes. Comments on the CE Councils questions are due by November 5, 2018.


As part of the SEC Best Interest Rule proposal, (at page 28; see also the latest Bates article on NASAA reaction to the proposal,) the SEC requested comment as to “whether there should be federal licensing and continuing education requirements for personnel of SEC-registered investment advisers.” Though there is general appreciation for the importance of continuing education for investment advisers, two significant groups reacted strongly against the proposed federal mandate.

In a comment submitted by the Investment Adviser Association, President and CEO Karen Barr said that “federal licensing and continuing education requirements are unnecessary and inappropriate.”

She stated: “the Commission’s request fails to appreciate that all adviser personnel are subject to a range of compliance requirements and already receive training on the laws, regulations, and fiduciary obligations applicable to advisers.” President Barr went on to remind the Commissioners that “states license and impose examination or competency requirements on investment adviser representatives.” She also questioned (i) “the Commission’s legal authority to adopt licensing requirements for personnel of investment advisory firms”; and (ii) whether the Commission has “the infrastructure or resources to administer such a program,” strenuously opposing “the Commission turning to FINRA to administer the program.”

Similarly, in his comment letter, NASAA President and Director of Alabama Securities Commission, Joseph Borg stated: “State securities administrators license these individuals; the SEC does not…The SEC already regulates thousands of broker-dealers and investment advisers. It should not stretch its limited resources even further by taking on direct regulatory responsibility for hundreds of thousands of investment adviser representatives. Rather, state securities regulators should continue performing this function. NASAA and its members have developed robust rules and processes (including a testing regime) to oversee investment adviser representatives.”


Efforts to address the increasing complexity of products and services in the financial marketplace through more concentrated and focused continuing education are laudable. Bates has written extensively of the many evolving challenges facing the industry that require real understanding and a continuous updating of expertise. The CE Council and FINRA are asking important questions that are reasonably intended to keep practitioners current in a fast-changing environment. The SEC inquiries, and the consequent reaction by the IAA and NASAA, remind us that the efforts to streamline and enhance the CE program are taking place in the midst of a broader debate on the appropriate regulation of broker-dealers and investment advisers. By the time a proposed rule change is ready, we may know whether the SEC will continue to pursue federal licensure and continuing education for investment advisers. Bates will continue to keep you up-to-date on developments.

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