As is the case with many new regulations, the Model Rule on Investment Adviser Representative Continuing Education (IAR CE) created by the North American Securities Administrators Association (NASAA) is generating a number of questions. The following information addresses the most frequently asked questions regarding current IAR CE requirements.
What are the specific continuing education requirements for IAR CE?
Investment Adviser Representatives (IAR) are required to complete 12 CE credits annually to maintain their IAR registration. The requirement includes six credits of Products and Practices content, and six credits of Ethics and Professional Responsibility content. The Products and Practices component is designed to ensure that IARs have ongoing knowledge and competency related to investment products, strategies, standards, and compliance practices relevant to the investment advisory industry. The Ethics and Professional Responsibility component is designed to ensure that IARs have ongoing knowledge and competency related to their duties and obligations to clients, including, but not limited to, issues related to the fiduciary duty owed to each client.
What are the requirements for Dually Registered IARs?
IARs who are also registered representatives of a FINRA member firm and in compliance with FINRA’s Regulatory Element CE requirement are allowed to use this course towards the Products and Practice component of their IAR CE requirements. In this case, the IAR is only required to complete the six credits of Ethics and Professional Responsibility content. Either the firm or the IAR must pay the reporting fee of $18 ($3 per credit hour multiplied by six credits).
Why are IARs required to complete continuing education?
To many, the more appropriate question to ask is, “Why haven’t IARs had CE requirements before now?” Most financial professionals are required to complete ongoing learning to protect themselves and their clients and minimize potential negative impacts. Research indicates that, by 2027, the amount of assets under management will total $147 trillion (about $140,000,000 per person in the US). Much of this money can be attributed to the retirement savings of millions of Americans.
This has resulted in the rapid expansion of the investment advisory profession. In fact, the number of registered investment advisers doubled between 2000 and 2022. Today, there are approximately 35,000 investment advisory firms and more than 390,000 IARs. All of these factors point to an opportunity and a need to support the important role that IARs play in their clients’ financial lives. The accumulation of knowledge in the form of continuing education is just one way to support IARs.
Other benefits of continuing education for IARs include:
- Professional development: Staying updated on industry trends, changes in regulations, and advancements in their field helps IARs provide exceptional service to their clients.
- Maintaining integrity: The Ethics and Professional Responsibility portion of CE can help provide clear direction to IARs on maintaining ethical standards in client interactions.
- Staying ahead of technology: CE helps IARs leverage the latest tools and technologies that can enhance their performance in financial planning and client portfolio management.
- Creating advantage: CE compliance demonstrates that an IAR is committed to staying informed about market trends, changing regulations, as well as new financial strategies and products.
Who needs to begin complying with the CE program?
Compliance starts with current and newly registered IARs in states that have adopted the Model Rule with an effective date of January 1, 2022. The rule applies to all registered IARs of both state-registered and federally covered-investment advisers.
As of January 2024, 18 states have implemented an IAR CE requirement. The 18 states are Arkansas, California (pending), Colorado, Florida, Hawaii, Kentucky, Maryland, Michigan, Mississippi, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, Tennessee, Vermont, Washington, D.C., and Wisconsin
Since this information will be continuously updated, it’s important to check with the NASAA website for the latest updates. For questions regarding your state’s requirements, contact the securities regulator in your area.
How are the requirements for IAR CE different from the requirements for CE in financial services?
One difference is in the reporting of course completion. Approved providers of IAR CE (e.g., STC) are required to report completions directly to FINRA (FINRA is NASAA’s vendor for program tracking).
A second difference is in the testing. For successful completion, IARs are given a maximum of three attempts to achieve a score of at least 70% on an end-of-course assessment. If unsuccessful, the course must be repeated in its entirety.
Is there a possibility of leveraging existing continuing education requirements with the new IAR CE requirements?
Yes. A firm can leverage its FINRA Firm Element training as long as its courses are also approved for IAR CE. Additionally, some IAR CE courses may even qualify for CE for certain professional designations (e.g., CFP).
Are there penalties for taking too long to take courses, taking too long to pass, or for not obtaining the required CE?
Currently, there are no penalties for taking extended time to complete courses or for needing multiple attempts to pass the assessment. However, for IARs who fail to complete the required training by the annual deadline, FINRA’s CRD system (for broker-dealers) and its IARPD system (for investment advisers) will set their IAR status as CE Inactive and this designation will then appear in either the BrokerCheck system or the Investment Adviser Public Disclosure (IAPD) system.
Although these “CE Inactive” IARs can continue to do business, if their IAR CE is not completed by the end of the following year, they will be unable to renew their registration.
What course options are available and live today?
As an approved provider, STC currently offers 44 courses in the Products and Practices and Ethics and Professional Responsibility categories.
To make completing CE easy, STC offers both 6-hour and 12-hour bundles. In addition to the selected number of online courses, each bundle also includes the mandatory CE assessment, a Certificate of Completion, 24/7 tech support, and automatic completion reporting to FINRA.
STC expects to add additional courses throughout the year and will be updating its offering list here.
What new courses will STC offer in 2024?
For 2024, some of the interesting new Ethics and Professional Responsibility courses being offered are Ethical Considerations with Complex Products, Market Manipulation, and IARs and Wrap Fee Accounts.
Some of the new Products and Practices courses include IARs and Equity Options, Treasury Securities, and IARs and Real Estate Investing.
If you have other questions that need answers, NASAA created a Master FAQ to address many additional logistical questions and detailed scenarios. Now is the time to prepare for this new requirement and to rely on learning pros like STC.
