FINRA recently shared with the CE Council the most common continuing education (CE) pitfalls found during examinations in a rare behind-the-scenes look. The release, which details findings related to Firm Element and Regulatory Element CE, allows firms to benefit from the summarized observations and reminders outlined in the document. These findings indicate firms may need to perform critical re-evaluations of their CE compliance programs and supervisory procedures.
Firm Element CE Shortcomings
Concerning Firm Element activities, FINRA spotlighted several flagged deficiencies, including:
- Failing to conduct and/or document a training needs analysis,
- Failing to track and enforce training completions and policies, and
- Failing to deliver training that addresses the needs identified in the annual training analysis
Effective Practices for Compliance to Follow
1.) For the needs analysis, firms must carefully consider business activities, regulatory changes, inspection findings, and other factors that dictate customized instruction. Companies should also document a detailed annual analysis indicating these considerations.
2.) Firms must track assignment completion once training needs are established. They should warn of impending due dates through multiple channels while sending managers firm-wide progress reports. Written procedures need to cover meaningful consequences for partial or late finishers.
3.) Finally, furnished training must be appropriate based on the annual needs assessment. Personnel managing Firm Element programming should intentionally match content to identified needs.
Regulatory Element CE Inadequacies
Additionally, FINRA noted one common Regulatory Element CE exam finding, which included:
- Failing to suspend activities requiring registration when a registered person had an inactive Regulatory Element CE status.
Effective Practices for Compliance to Follow
FINRA used this notice to remind firms that it is imperative that they prohibit customer-facing activities by registered representatives who lapse into a “CE inactive” status due to missing CE deadlines. FINRA rules explicitly forbid such individuals from conducting registerable duties. This failure exposes firms to undue compliance risk and repercussions.
Firms can reduce violations by instituting stringent tracking procedures to identify reps approaching inactive status. Based on CE non-compliance, they should follow up with unambiguous written and verbal notifications about prohibited activities. IT systems should completely block inactive reps’ access to tools and accounts associated with customer transactions or advice. Supervisors of soon-to-be inactive reps require briefings on monitoring protocols.
Written supervisory policies must describe precise disciplinary actions for violations. Best practices feature automated early warnings, account access removal, managerial oversight, and explicit sanctions.
Overall, the release by FINRA aims to share non-compliance findings to help firms improve CE programs, completion rates, and monitoring procedures to reflect a strong culture of compliance. To read the full document, click here.
