FINRA Moves Forward with Annual Regulatory CE

Earlier this month, the Financial Industry Regulatory Authority (FINRA) filed a proposal with the Securities and Exchange Commission (SEC) that would require, among other changes, the Regulatory Element of continuing education to be completed annually rather than every three years. The proposed rule change also asks that individuals be able to maintain their qualification for a longer period of time following the termination of a registration.

According to FINRA, the Regulatory Element was originally designed at a time when most individuals had to complete the Regulatory Element at a test center, and its design was shaped by the limitations of the test center-based delivery model. In 2015, FINRA transitioned the delivery of the Regulatory Element to an online platform, which allowed individuals to complete the content online at a location of their choosing, including their private residence.

Based on the changes in technology and learning theory, FINRA believes that the Regulatory Element content can be updated and delivered in a timelier fashion and tailored to each registration category. Therefore, FINRA is proposing to amend Rule 1240(a) to require registered persons to complete the Regulatory Element annually by December 31. The proposed amendment would also require registered persons to complete Regulatory Element content for each representative or principal registration category that they hold.

Under the proposed rule change, firms would have the flexibility to require their registered persons to complete the Regulatory Element sooner than December 31, which would allow firms to coordinate the timing of the Regulatory Element with other training requirements, including the Firm Element. For example, a firm could require its registered persons to complete both their Regulatory Element and Firm Element by October 1 of each year.

Individuals who would be registering for the first time on or after the implementation date of the proposed rule change would be required to complete their initial Regulatory Element for that registration category in the next calendar year following their registration. Additionally, individuals who would be reregistering on or after the implementation date of the proposed rule change would also be required to complete their initial Regulatory Element for that registration category in the next calendar year following their reregistration.

Consistent with current requirements, individuals who fail to complete their Regulatory Element within the prescribed period would be automatically designated as CE inactive. However, the proposed rule change preserves FINRA’s ability to extend the time by which a registered person must complete the Regulatory Element for good cause shown.

Under the proposed rule change, the amount of content that registered persons would be required to complete in a three-year, annual cycle for a particular registration category is expected to be comparable to what most registered persons are currently completing every three years. In some years, there may be more required content for some registration categories depending on the volume of rule changes and regulatory issues.

To read the complete Regulatory Proposal, click here.