RIA Compliance and Practice Management Blog

NASAA Adopts Investment Adviser Representative Continuing Education Model Rule

Posted by RIA in a Box

Dec 8, 2020 2:00:26 PM

NASAA Passes RIA Continuing Education Model Rule

On November 24, 2020, North American Securities Administration Association ("NASAA") members elected to adopt an investment adviser continuing education requirement with the goal of ensuring that advisors receive proper and updated training on the securities business relevant to their duties and obligations. The rule was originally proposed in February 2020 and was open to the public for comments until the middle of April. To seek further feedback, NASAA conducted a survey in September 2020 and requested comments regarding a proposed amendment in October 2020.

While many financial service professionals are subject to a continuing education requirement, investment advisers have not had such a requirement in the past. Meanwhile, investment advisers maintain an impactful role on the financial health of many individuals and households across the country. Concerned with this dynamic, NASAA sought data on the topic in 2017. Overwhelmingly, NASAA Members viewed an Investment Adviser Continuing Education ("IAR CE") as a necessity. With this in mind, NASAA designed a framework for such a requirement.

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According to the adopted model rule, there are two components to the Continuing Education requirement that an Investment Adviser must complete each reporting period:

  1. IAR Ethics and Professional Responsibility Requirement: An investment adviser representative must complete 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.”
  2. IAR Products and Practice Requirement. An investment adviser representative must complete six (6) Credits of IAR Products and Practice Content offered by an Authorized Provider.”

In developing the Model Rule, NASAA aimed to design the framework such that it be effective and valuable both for regulators to ensure continued competency by IARs and for IARs to develop their knowledge base. To achieve this, NASAA sought to maximize flexibility in CE content and minimize duplicative CE requirements.

In this framework, NASAA acts as the centralized body that manages IAR CE. In this role, the Association will implement standardized criteria under which it will license potential IAR CE content providers and individual IAR CE courses. Thus, IARs in jurisdictions that choose to adopt this rule will consume NASAA-approved IAR CE content to satisfy their requirement. NASAA plans to begin approving CE providers and courses in the first quarter of 2021.

An investment adviser who fails to complete or report the necessary continuing education credits by the end of a Reporting Period will renew as “CE Inactive.” The investment adviser may not change this label until he or she fulfills the requirement for all previous Reporting Periods.

In certain circumstances, an adviser may already comply with all or part of the requirement. For example, investment advisers who currently hold a credential that qualifies for an examination waiver under Rule USA 2002 412(e)-1(d) fulfill both components of the IAR CE requirement so long as NASAA’s specified conditions are met. Credentials that qualify for an examination waiver include the Certified Financial Planner ("CFP"), Chartered Financial Analyst ("CFA"), and Chartered Financial Consultant ("ChFC") professional designations.

Furthermore, Broker-Dealers who complete FINRA’s continuing education requirements may fulfill the IAR Products and Practice Requirement so long as FINRA’s continuing education content meets NASAA’s specified baseline.

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In the near future, we expect the vast majority of individual states to adopt this model rule as the basis for their own investment adviser continuing education requirement. As such, we recommend that the Chief Compliance Officer ("CCO") of all state-registered investment advisory firms review this new model rule in detail.

For the full text of the Rule please click here.

Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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