NASAA Adopts CE Rule for Investment Advisers

On November 24, 2020, the North American Securities Administrators Association (NASAA) adopted, substantially as proposed, a model rule to implement a continuing education (CE) program for investment adviser representatives (IARs). The proposed framework would apply to IARs associated with SEC and state-registered investment advisory firms who are registered in member jurisdictions that adopt NASAA’s framework.

In a press release, NASAA’s President Lisa A Hopkins said, “This model rule represents the culmination of years of work by state securities regulators and industry to develop a relevant and responsive continuing education program.” She added, “This successful collaboration will help promote heightened regulatory compliance while also helping investment adviser representatives better serve their clients by remaining knowledgeable of current regulatory requirements and best practices.”

Unlike other financial service professionals, investment adviser representatives are currently not subject to continuing education requirements to maintain their licenses with regulators. The model rule will help NASAA members “close this gap” by requiring IARs to take 12 hours of continuing education a year, NASAA said. State securities regulators can consider adopting the rule in their own jurisdictions.

NASAA, a voluntary body made up of state securities regulators, conducted a survey in February regarding course content. (Its members include 67 state, provincial, and territorial securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.)

According to the model rule, every investment adviser representative registered under section 404 of the 2002 Act (or 201 of the 1956 Act) will need to complete the following IAR continuing education requirements each Reporting Period:

1.) Six (6) Credits of IAR Regulatory and Ethics Content offered by an Authorized Provider, with at least three (3) hours covering the topic of ethics; and
2.) Six (6) Credits of IAR Products and Practice Content offered by an Authorized Provider.

NASAA defines a “Reporting Period” as one twelve month (12) period. An investment adviser representative’s initial Reporting Period with this state commences the first day of the first full Reporting Period after the individual is registered or required to be registered with this state.

According to the regulation, an investment adviser representative who fails to comply with this rule by the end of a Reporting Period will renew as “CE Inactive” at the close of the calendar year in this state until the investment adviser representative completes and reports all required IAR continuing education Credits for all Reporting Periods as required by this rule. An investment adviser who is CE inactive at the close of the next calendar year is not eligible for investment adviser representative registration or renewal of an investment adviser representative registration.

Quest CE will continue to follow the latest developments of this adopted model. For future developments, subscribe to Quest CE’s Compliance Digest. To read more about the NASAA Model Rule on Investment Adviser Representative Continuing Education (Model Rule 2002-411(h) or 1956-204(b)(6)-CE), click here