By John M. Jascob, J.D., LL.M.
NASAA has requested public comment on a proposed investment adviser representative continuing education program, including a proposed state model rule for adopting jurisdictions to implement the framework. The stated goal of the program is to ensure that investment adviser representatives can better serve their clients by keeping their skills sharp and staying abreast of current regulatory requirements and best practices
"Investment adviser representatives play an important role in the financial lives of millions of Americans, yet unlike most financial services professions they are not required to meet a continuing education requirement to maintain their licenses to work with investors. We are proposing a program to close this education and investor protection gap," said Indiana Securities Commissioner Alex Glass, chair of NASAA’s Investment Adviser Section, in a news release.
Survey results. In 2017, NASAA’s Investment Adviser Continuing Education Committee worked with a leading education and testing vendor to develop a detailed survey to collect data from NASAA members and industry participants about an investment adviser representative continuing education program (IAR CE program). The survey included questions regarding, among other things, the need for IAR CE, whether a CE program would be supported by regulators and the industry, and potential topics to be included in any future program.
Given the strong support among state securities regulators, NASAA launched an industry-focused survey in early 2018 and met with industry and regulatory stakeholders to discuss IAR CE. Based in part on the findings from these surveys, NASAA’s IAR CE Committee developed a framework for an IAR CE program and drafted a proposed implementing model rule.
Proposed IAR CE framework. The proposed framework is structured around NASAA serving as the centralized body under which IAR CE flows. Similar to NASAA’s development and maintenance of the Series 63, 65, and 66 examinations, NASAA will develop and implement standardized criteria under which it will review potential IAR CE content providers and individual courses for approval. The proposed model rule in turn requires IARs in jurisdictions adopting it to take NASAA-approved IAR CE courses/content from NASAA-approved providers in order to satisfy the requirements in the proposed model rule.
General IAR CE requirements. The proposal envisions an annual IAR CE requirement under which adviser representatives would need to complete 12 total hours of CE. Six of the 12 hours would focus on a "Products and Practice" component designed to ensure ongoing knowledge and competency related to investment products, strategies, standards, and compliance practices relevant to the investment advisory industry. The remaining six hours would focus on an "Ethics and Professional Responsibility" component designed to ensure ongoing knowledge and competency related to a representative’s duties and obligations to his or her clients, including issues related to the fiduciary duty owed to each client.
Reporting and tracking. Reporting and tracking for IAR CE would be done by the course providers, though the reporting obligation would ultimately fall on the individual investment adviser representative. To facilitate reporting and tracking, NASAA-approved course providers would be given access to IARD either directly or via an intermediate system through which they would be required to report when a representative has completed an approved course or program. A small fee would be charged to the content providers to report IAR CE completion on a per hour and per individual basis.
Comments on the proposed continuing education program and accompanying model rule are due by March 30, 2020.