FINRA Proposal to Enhance Continuing Education

The Securities Industry/Regulatory Council on Continuing Education (CE Council) recently presented a proposal to FINRA regarding Continuing Education (CE) requirements. The request for comments expires on April 20, 2020.

If you would like to review the entire Regulatory Notice 20-05, there is a wealth of information. Below are some highlights.

Transition to an Annual Regulatory Element

FINRA Rule 1240(a) requires covered persons to complete regulatory element training no later than their second registration anniversary date and then every three years thereafter. The proposal would require covered persons to complete training annually to cover significant regulatory developments more timely. There is concern that the requirements may be both operationally and financially burdensome to Firms to track. Also, there may be additional burdensome to limited business firms where significant developments may not happen annually.

More Relevant and Tailored Content with Diverse Instructional Formats

Currently, CE training falls in one of two buckets. Supervisors must complete S201. All other parties must complete S101. The CE Council recommends a redesign to further tailor the program to each registration category an individual holds. Additionally, they recommend incorporating different instructional formats for covered persons.

Publish Learning Topics for Continuing Education in Advance

Firms are not provided with the specific topics covered during the CE. As a result, topics may be duplicated with those covered in their internal annual training program. The CE Council recommends that a list is published the year before. This would allow Firms to better customize and diminish duplicative training.

Enhance the Functionality of FINRA Systems for Use in Continuing Education

The CE Council recognizes that a change to the annual requirement would increase the use of the FINRA CRD system. The Council recommends that FINRA enhance the current system to allow for these changes with tools to assist the firm in fulfilling these requirements.

Recognize Other Training Requirements to Satisfy Firm Element Requirements

FINRA Rule 1240(b) requires all covered persons who have direct contact with customers within the business of the Firm, including operations, research, and supervisors, to complete annual Firm element training. The CE Council recommends that FINRA allow Firms to consider other completed training to satisfy the Firm element requirement. This could include training completed during the annual compliance meeting and AML training. Additionally, FINRA is also proposing expanding the Firm element requirement to covered persons who do not come into contact with clients or “permissive registrations”.

Improved Continuing Education Guidance and Resources Provided to Firms

The CE Council recommends that the tools and guidance currently provided in the firm element advisory are updated and improved. Firms use these tools to conduct the firm element annual needs analysis. Improved resources would greatly assist in planning for annual training needs.

Develop a Content Catalog for Optional or Supplemental Use

Firms currently have flexibility in how they develop their training program. Some firms may do all the planning and execution internally, some may use third-party vendors, and others may use a combination of the two. However, the CE Council proposes that FINRA provide a central place where vendors, articles, and guidance are located to better assist Firms in locating resources.

Consider Rule Changes for Previously Registered Individuals to Maintain Their Qualification

The CE Council recognizes that unlike covered persons, other professions (lawyers and accountants) may maintain their registration through completed CE even if they are inactive. The proposal recommends that previously registered individuals maintain their qualifications for their terminated registration categories by participating in an annual continuing education program. The goals are many, including more flexibility to address life and career changes that may require a covered person to take leave and motivation to encourage greater retention within the industry. Finally, the standards of CE would be just as rigorous as if they were active registered persons.

Firms and individuals must submit all comments related to this proposal by April 20, 2020.

Contact us to learn how we can help your firm with its CE program and Firm Element requirements.

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