If you were paying attention back in November, you’re well aware that the NASAA has approved a new CE requirement that has the potential to impact every (yes, every) investment adviser representative. For more information on the original announcement, read our blog, “NASAA Adopts CE Rule for Investment Advisors.”
Since that original announcement, the NASAA has come forward with some new details surrounding the regulation, including compliance dates, reciprocity considerations and consequences for failing to comply. In this blog, we cover what we consider to be the top 10 most need-to-know facts.
1.) Who Will The IAR CE Program Apply To?
Every investment adviser representative (IAR) registered in a jurisdiction that adopts the model rule will be subject to its CE requirements. The mandatory CE program will apply to all registered IARs of both state-registered and federal covered investment advisers. IARs will be required to meet the CE requirements of any state in which the IAR is registered.
2.) When Do IARs Need To Begin Complying With The CE Program?
Compliance will begin with the 2022 calendar year in states adopting the model rule. CE credits must be reported by the end of each year. Newly registered IARs will be required to meet the annual IAR CE requirement by the end of the first full calendar year following the year in which they first become registered.
3.) How Many Credits/Hours Are Required?
IARs will need to attain 12 CE credits each year in order to maintain their IAR registration. A “credit” is a unit that has been designated by NASAA as at least 50 minutes of educational instruction. The 12 credits must include 6 credits of Products and Practices and 6 credits of Ethics and Professional Responsibility.
The Products and Practices component is designed to ensure ongoing knowledge and competency related to investment products, strategies, standards, and compliance practices relevant to the investment advisory industry.
The Ethics and Professional Responsibility component is designed to ensure ongoing knowledge and competency related to an IAR’s duties and obligations to his or her clients including, but not limited to, issues related to the fiduciary duty owed to each client.
4.) If An IAR Earns More Than 12 CE Credits In A Year, Can He Or She Carry Credits Over To The Next Year?
No. An IAR who completes more CE credits than are required for the year may not carry forward excess credits into a subsequent year. However, excess CE credits will be recorded in the IAR’s course transcript section of the Central Registration Depository (CRD). Similarly, IARs will not be able to complete two successive renewals with the same course. CRD tracking will include duplicate courses in the course transcript section, but duplicate courses will not count toward the IAR CE requirement, even if completed in another year.
5.) What If An IAR Changes Firms Mid-Year?
If an IAR begins taking courses during a calendar year, then changes firms mid-year, the credits completed before the switch will appear in the IAR’s course transcript in CRD and will apply toward the annual CE requirement.
6.) Who Will Provide CE That Meets The Requirements Of The Program Under The Model Rule?
Under the model rule, IARs are required to take NASAA-approved CE courses from approved course providers. Quest CE is waiting on Prometric to finalize its standardized criteria under which content providers can be approved to begin filing courses. Quest CE expects this to take place some time in Q3.
7.) Are There Required Courses?
No, other than the requirement that the 12 hours of CE must include six credits of Products and Practices and six credits of Ethics and Professional Responsibility. IARs will self-manage finding and completing CE courses, which will enable them to tailor their CE to their interests and business models.
8.) Does FINRA Firm Element Training Count Toward IAR CE Requirements?
Yes, so long as that training is approved by NASAA. Quest CE will evaluate it’s current Firm Element catalog to see which of its courses can be approved for CE credit.
9.) What Happens If An IAR Does Not Complete The CE Requirements In A Timely Manner?
If an IAR does not complete the CE requirement by the annual deadline, CRD will set his or her IAR registration status to “CE Inactive,” which is the status that will then appear in the Investment Adviser Public Disclosure (IAPD) and in BrokerCheck. The IAR will remain “CE Inactive” until he or she either becomes compliant or action is taken by the state. An IAR who is CE inactive at the close of the next calendar year is not eligible for IAR registration or renewal of an IAR registration.
10.) What If The IAR’s Home State Has Not Adopted The Model Rule And The IAR Seeks To Maintain His/Her Registration In A State That Has Adopted The Model Rule?
If the IAR’s home state has not adopted the model rule, the IAR would need to comply with the CE requirements in each of the other states in which he or she is registered as an IAR. Reciprocity across states may be available so long as that state has as stringent of a rule as the model rule and the IAR is in compliance with the home state’s IAR CE requirements.