On November 30, 2020, the North American Securities Administrators Association (NASAA) adopted a model rule that established continuing education requirements for Investment Adviser Representatives (IARs). However, the Continuing Education (CE) model rule or similar requirement has not yet been adopted by every state.
Every IAR registered in any jurisdiction that mandates CE requirements will be required to comply with those state(s) requirements, regardless of whether the IAR’s home state has adopted CE requirements. The mandatory CE program will apply to all registered IARs of both state-registered and SEC-registered investment advisers.
NASAA’s program includes a Products and Practices component, as well as an Ethics and Professional Responsibility component. This program is designed to be compatible with other CE programs that cover relevant content, including some of those required for certain professional designation holders. To develop this program, NASAA teamed up with Prometric, a global testing services provider. A list of approved providers can be found below:
Quest CE: https://learn.questce.com/iarce/
Securities Training Corp.: https://www.stcusa.com/iar/
Solomon Exam Prep: https://solomonexamprep.com/seriesCE
What we know so far about which states will require CE requirements
To date, Mississippi, Maryland, and Vermont have already adopted CE requirements. IARs registered in those states must complete their CE requirements by December 31, 2022.
Arkansas is planning to finalize its CE requirement in 2022. If that occurs, implementation will not take place until January 1, 2023. The same is true for Washington, D.C. and Nevada. Kentucky, Wisconsin, and Michigan have already adopted CE requirements with an effective date of January 1, 2023.
As an example, Michigan’s CE rule will require IARs of a Registered Investment Adviser (RIA) to complete the CE training if they are registered in Michigan (through Form U-4). After the Michigan CE rule becomes effective on January 1, 2023, IARs registered in Michigan must complete twelve credits by December 31, 2023, to maintain their Michigan registration. The CE requirement does not apply to an IAR who has a client in Michigan, but who is not required to register in Michigan.
If a state adopts the model rule or similar requirements, IARs registered in that jurisdiction would be required to satisfy the CE requirement to renew their license. They are required to do so, even if the IAR’s home state has no CE requirement.
FAQs about IAR CE requirements
NASAA has provided answers to frequently asked questions (FAQs) at https://www.nasaa.org/industry-resources/investment-advisers/resources/iar-ce-faq/. Several answers are very interesting. For example, IARs will not be able to carry forward excess CE courses to a subsequent year.
In addition, there is no limitation or maximum credits restriction for courses delivered as self-study or a similar method. Nevertheless, these courses must be officially approved by Prometric and NASAA before they can be applied toward CE requirements.
According to the answers to the FAQs, an IAR registered in another state, who is also registered as an IAR in his or her home state, is in compliance, as long as two conditions are satisfied:
1. The IAR’s home state has CE requirements that are at least as stringent as the model rule; and
2. The IAR is in compliance with the home state’s CE requirements.
NASAA’s model rule gives special dispensation to dual registrants. An IAR, who is also a registered broker-dealer agent and complies with FINRA’s CE requirements, is considered to be in compliance with the requirement to report six credits of Products and Practices content. It should be noted, however, that the FINRA CE content must continue to meet certain baseline criteria as determined by NASAA.
Credits from CE courses taken to maintain professional designations can be applied to the IAR CE program, as long as the provider and course have been approved through Prometric. CE providers are likely to promote the fact that certain courses can be used to satisfy IARs’ continuing education requirements for professional designations, as well as those needed in states that have adopted the model or similar rule. Nevertheless, no exemptions or waivers from CE requirements are available based on experience or other qualifications.
Keep in mind that states do not always adopt NASAA’s model rule in every respect. Jurisdictions often tweak the model rule, so their CE requirements may be slightly different.
The CE Model Rule imposes a harsh penalty on IARs who fail to satisfy their CE requirements. If IARs do not complete their required CE by the annual deadline, they will pay the registration renewal fee and CRD will set their IAR CE status to “CE Inactive,” which will then appear on the Investment Adviser Public Disclosure and BrokerCheck public disclosure websites. Although IARs can continue to do business, “CE Inactive” means that they will not be able to renew their registration if they fail to take the required courses by the end of the relevant year. Furthermore, those IARs who are “CE Inactive” must still satisfy their current CE requirements along with the courses they missed during the previous year.
About RIA Compliance Group: RIA Compliance Group is an investment adviser compliance consulting firm based in Delray Beach, Florida. The firm’s mission is to provide affordable, timely, practical, and cost-effective compliance advice. We help investment advisers to comply with the myriad of state and SEC regulations and compliance obligations facing their firms. RIA Compliance Group takes pride in giving personal service and real world compliance advice, not theoretical concepts and legalese. The firm interacts on a daily basis with SEC and state securities regulators.