FREQUENTLY ASKED QUESTIONS:
INVESTMENT ADVISER REPRESENTATIVE CONTINUING EDUCATION
The North American Securities Administrators Association (NASAA) announced on November 30, 2020 that its membership voted to adopt a model rule to set parameters by which NASAA members could implement continuing education programs for investment adviser representatives in their jurisdictions. The model rule has a products and practices component and an ethics component and is intended to be compatible with other continuing education programs. The model rule is available here.
The model rule represents the culmination of years of work by state securities regulators and industry to develop a relevant and responsive continuing education program. 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.
Below are answers to frequently asked questions about the Investment Adviser Representative Continuing Education initiative.
Who will the Investment Adviser Representative Continuing Education (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.
Why is CE needed for IARs?
IARs are tested for knowledge before they are registered, but there is no mechanism to ensure that their level of knowledge and competence is maintained or expanded. By comparison, most other financial professionals are subject to CE requirements, including broker-dealer agents, insurance agents, certified financial planners, and real estate agents. Given that IARs play an important role in their clients’ financial lives, NASAA received significant support from state regulators and the securities industry for the creation of a CE program.
Are IARs required to take specific courses?
No, IARs are free to select courses that appeal to their interests and business models so long as they meet the credit requirements and the courses are approved content for the IAR CE program. The program provides maximum flexibility for IARs to choose to complete their CE requirement by taking any approved course from any approved provider.
CREDIT HOURS & REPORTING
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.
How many credits/hours are required?
Beginning in 2022, 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.
What is the Products and Practices component of IAR CE model rule?
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.
What is the Ethics and Professional Responsibility component of IAR CE model rule?
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.
Who is the course management vendor (CMV)?
The CMV is Prometric LLC, (Prometric), which was chosen based on its experience and reputation. Prometric understands the vital role that assessment programs serve in enabling professional and academic advancement. Prometric has worked over the years to develop and continually refine the expertise required to support these critical assignments, and it has received glowing recommendations from states that have used its services. By working collaboratively with subject matter experts with many leading organizations to understand current organizational requirements, Prometric has also built a strong foundation of knowledge in such industries as financial services, information technology, professional services, and government licensing.
If an IAR earns more than 12 CE credits in a year, can he or she carry the excess 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).
Can an IAR complete the same course in two successive renewals?
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. However, a duplicate course that has been updated with a new course number will provide the IAR with CE credit for that course.
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.
If an IAR terminates their registration and then seeks to re-register 23 months later with a different IA, is there a policy with respect to how the IAR CE requirements should be addressed? Does the individual need to make up missed CE credits?
Yes. To re-register during the two year exam window, the IAR would need to complete any missed CE. For instance, if the IAR leaves the industry in December 2022 without completing the 12 hours of CE for 2022, and then attempts to re-enter in 2024, the IAR would need to complete (before becoming registered) 12 hours for 2022 and 12 hours for 2023. The 12 hours for 2024 would be due by December 31, 2024. The CE for 2022 and 2023 need not be completed within those years but can be done on a catch up basis in 2024. Alternatively, the IAR can re-take and pass the Series 65 or 66 (or if eligible receive a state exam waiver) in lieu of completing the missing CE.
Does an IAR need to make up missed CE credits?
Yes. Courses completed in the current year will apply to the current year and the past year, if there is a deficiency to be resolved. Completed IAR CE credits completed in any year will first be applied to the previous year, if the IAR did not complete the previous year’s requirement, and then to the current year’s requirement.
Example 1: Joe failed to complete his IAR CE requirement for 2022 by December 31, 2022. Any IAR CE courses he completes in 2023 will be applied to the 2022 deficiency until that requirement is completed. Excess credits in 2023 will not be applied to the 2024 IAR CE requirement.
Example 2: A broker-dealer (BD) registered representative (RR) registers as an IAR on July 1, 2022. The RR does not have an IAR CE requirement for 2022. The IAR CE requirement for that IAR would begin on January of 2023. If the IAR completes courses during 2022, these credits will not be applied to future IAR CE requirements.
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. NASAA is developing standardized criteria under which potential IAR CE content providers and individual CE courses will be approved. Any vendor, firm, individual, or state may provide CE so long as the provider and course are approved. NASAA expects a wide range of vendors to offer IAR CE courses.
Who is eligible to submit courses for approval?
Anyone can submit courses for approval once they are an approved provider; they are required to submit an application with their course materials and meet the established course criteria, which will be reviewed and approved by Prometric. BD and IA firms may apply for course approvals themselves to expose their RRs and IARs to education content they feel is most relevant to their practice. States may also develop and offer their own courses if they choose.
What is the process for obtaining approval of providers and courses?
NASAA has retained Prometric to review and approve both providers and courses in accordance with criteria established by NASAA’s IAR CE Committee.
What criteria will be used to assess potential IAR CE providers and course content?
Potential IAR CE providers, courses and content will be assessed on criteria including, but not limited to:
- Ability to meet the learning objectives and goals of IAR CE;
- Quality of the instructors and materials;
- Qualifications of the instructors;
- Experience in delivering educational content, such as training or CE;
- Prior customer/student evaluations;
- Timeliness of content;
- Ability to track and report course/content completion; and
- Prior experience in the financial services industry.
What if a firm wants approval of course materials that include proprietary information?
A firm will need to go through the same approval process as other providers. A firm specific class would be accessible only by associated persons of that firm.
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. The courses may be offered by various vendors. Resources will be available on www.nasaa.org to help find information regarding CE requirements, including approved vendors and courses.
Is there flexibility with course content taking into consideration, for example, combining an ethics course in another topic or streamlining courses most applicable to a specific business model?
Providers will indicate the total number of credits per course and whether the courses may cover both types of required content.
IARS REGISTERED IN MULTIPLE STATES
What if the IAR's home state has not adopted the model rule and the IAR seeks to maintain his or 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. See also the following questions and responses.
Will an IAR receive reciprocity in other states if the IAR meets the CE requirements of his or her home state?
An IAR registered in another state who is also registered as an IAR in his or her home state is considered to be in compliance if the home state has CE requirements that are at least as stringent as the model rule and the IAR is in compliance with the home state’s IAR CE requirements.
What if an IAR is registered in multiple states and there is a variation in the CE requirements?
An IAR registered in multiple states that have adopted the model rule will be required to comply with each state’s continuing education requirements. However, the IAR will be in compliance with the CE requirements of other states so long as the IAR’s home state has CE requirements that are at least as stringent as the model rule and the IAR has satisfied those requirements.
What if the IAR's home state has not adopted the model rule, the IAR is registered in multiple states, and there is a variation in the states' CE requirements?
In the absence of home state adoption of the model rule, the IAR will be in compliance with the continuing education requirements of the other states in which the IAR is registered, and which have adopted the model rule, if the IAR is in compliance with the CE requirements of at least one state that has CE requirements that are at least as stringent as the model rule and the IAR has satisfied those requirements.
If an IAR has an active IA registration in a state and adds another state, will the current year IAR CE completion requirement apply to the new state?
Yes. If an IAR has an active IA registration in a state and adds another state, the current IAR CE completion requirement will apply to the new state.
Who can be contacted with questions regarding a state's requirements?
For any questions regarding a jurisdiction’s specific requirements, please contact that jurisdiction’s securities regulator. Contact information is available here.
For dual registrants, can the CE required by FINRA for BD agents meet any of the CE requirements for IARs?
An IAR who is also a registered BD agent and who complies with FINRA’s CE requirements is considered to be in compliance with the requirement to report six credits of Products and Practices content, so long as the FINRA CE content continues to meet certain baseline criteria as determined by NASAA.
Does FINRA Firm Element training count toward IAR CE requirements?
Yes, if the training is approved by NASAA. Anyone, including a BD firm, can seek approval to provide CE that meets the criteria established by NASAA.
Does FINRA Regulatory Element training count toward IAR CE requirements?
NASAA will accept the securities industry CE Regulatory Element as an equivalent of the Products and Practices module so long as the FINRA CE content continues to meet certain baseline criteria as determined by NASAA.
Are any IARs exempt from CE requirements based on factors such as length of experience and/or professional designations?
No. There are no exemptions or waivers available based on experience or other qualifications. However, see the FAQ immediately below.
Can the CE required to maintain certain professional designations meet some or all of the CE requirements for IARs?
Yes, so long as the provider and course have been approved through Prometric for IAR CE purposes. Providers will likely promote the fact that certain courses qualify for IAR CE so IARs can look for courses that meet the CE requirements for both IAR CE and their professional designations.
FAILURE TO COMPLETE
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.
What happens if an IAR is CE Inactive during registration renewal season?
An IAR who fails to comply with CE requirements by the end of a 12-month reporting period will renew as “CE Inactive” at the close of the calendar year until the IAR completes and reports all required IAR CE credits for the reporting period. 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.
How does a CE Inactive IAR become current with the CE requirement?
Courses completed in the current year will apply to the past year if there is a deficiency to be resolved. Completed IAR CE credits completed in any year will first be applied to the previous year and then to the current year’s requirement.