What you Need to Know about FINRA’s CE Proposal

In February, FINRA issued a regulatory notice seeking comment on a proposal to implement recommendations of the Securities Industry/Regulatory Council on Continuing Education, enhancing the continuing education requirements for securities industry professionals.

Specifically, the proposal consists of three major provisions: 1.) the transition of Regulatory Element to an annual requirement, 2.) the ability to recognize other training requirements as part of Firm Element and 3.) the possibility to enable terminated individuals who were previously registered to maintain their qualification by participating in an annual continuing education program.

For a bit of a history lesson, continuing education for registered persons of broker-dealers was established by the CE Council nearly 25 years ago and consists of both Regulatory Element and Firm Element. The Regulatory Element is generally delivered every three years and focuses on regulatory requirements and industry standards, while the Firm Element is an annual requirement and focuses on securities products, services and strategies firms offer, firm policies and industry trends.

If approved, FINRA would implement the following changes regarding its continuing education program:

Regulatory Element

Transition to an Annual Requirement: FINRA is proposing that Regulatory Element transition to an annual requirement that must be completed by the end of each calendar year. Under the proposal, registered persons would complete approximately one-third of the content they currently complete. This may, however, not be the case for individuals with multiple registrations that would be required to complete content specific to each registration category they hold.

Design More Relevant Content with Diverse Formats: FINRA will work with the CE Council to: (1) replace the S101 and S201 subprograms with a consolidated Regulatory Element program; (2) identify significant rule changes and other regulatory developments relevant to each registration category; and (3) determine the overall amount of learning content needed.

Publish Learning Topics: FINRA will work with the CE Council to identify and publish the Regulatory Element learning topics for each coming year in advance. Specifically, by October 1 of each year, FINRA and the CE Council will publish the learning topics for the next year so firms can coordinate better with their Firm Element program.

Enhance Functionality of FINRA Systems: FINRA is also proposing enhancements to its CRD system to provide firms with additional management and tracking functionality. FINRA would also enhance the FINRA FinPro system to enable registered persons to launch and track completion of the program through that system, rather than through CE Online.

Firm Element

Recognize Other Training Requirements: FINRA is proposing to amend Rule 1240(b) to provide that member firms may consider training relating to the AML compliance program and annual compliance meeting towards satisfying an individual’s annual Firm Element requirement.

Improve Guidance and Resources: FINRA and the CE Council will work towards improving the guidance and resources available to firms to develop effective Firm Element training programs, such as updated templates for documenting training plans and specific principles for conducting the required annual needs analysis.

Develop Content Catalog: FINRA and the CE Council are also proposing to develop a catalog of continuing education content that would serve as an optional resource for firms to select relevant Firm Element content and create learning plans for their registered persons.

Maintaining Qualification Status Post Termination

The CE Council is recommending that FINRA, and the other SROs participating in the CE program, consider rule changes that would enable previously registered individuals to maintain their qualification for their terminated registration categories by participating in an annual continuing education program.

The annual continuing education under the proposed program would consist of a combination of Regulatory Element content and content selected by FINRA and the CE Council from the Firm Element content catalog discussed above. The content would correspond to the registration category for which an individual wishes to maintain his or her qualification.

The comment period for this proposal expires April 20, 2020. To read the complete notice, click here