Finra is proposing to increase the frequency of continuing education regarding regulatory developments while providing a longer runway for former brokers to reenter the industry as long as they keep up with educational requirements.
Last Thursday, the Financial Industry Regulatory Authority Inc. filed a proposal with the Securities and Exchange Commission that would require registered representatives to complete the regulatory element of continuing education every year, instead of once every three years.
The broker-dealer self-regulator also is proposing to allow brokers to leave the industry and maintain their registration status for up to five years instead of the current two as long as they complete continuing education.
The expanded time frame would let brokers “address life and career events” that take them out of the industry for an extended period of time without having to retake qualifying exams when they return, according to the proposal. It also asserted that the change would help increase diversity and inclusion in the brokerage industry.
“Significantly, the proposed rule change will be of particular value to women, who continue to be the primary caregivers for children and aging family members and, as a result, are likely to be absent from the industry for longer periods,” the proposal states. “In addition, the proposed rule change will provide longer-term relief for women, individuals with low incomes and other populations, including older workers, who are at a higher risk of a job loss during certain economic downturns and who are likely to remain unemployed for longer periods.”
Registered reps likely will welcome the rule change, said Brian Marks, president at Knopman Marks Financial Training.
“This will enable people to make decisions that work for their families and their lifestyles and then return to the industry when they’re ready and get straight to work,” Marks said.
Finra said it was recommending an increase in the frequency of regulatory CE in order to provide reps with “more timely and relevant training” on new regulations. The regulator has been delivering regulatory CE online since 2015, which means it can change the current once-every-three-years cycle that’s based on physical access to testing centers.
Under the proposal, for instance, a rep would have taken CE on Regulation Best Interest, the broker investment advice standard, shortly after it went into force last year rather than waiting until 2023.
“The advantage is reps are reinforced in their [understanding] of the rule early on rather than having to wait for a three-year cycle,” Marks said.
The amount of regulatory CE that reps take in annual increments over the course of three years would be roughly equivalent to what they previously covered once every three years, Finra said.
While it’s proposing an increase in regulatory CE, Finra also would provide brokerages with more latitude in how they deliver “firm element” CE, which focuses on securities products, services and strategies, and firm policies and industry trends.
Finra would allow firms to consider anti-money-laundering training and their annual compliance meeting as satisfying the firm element requirement.
That accommodation is important because increasing the regulatory CE requirement adds to a firm’s administrative challenge in tracking CE for its reps, said Doug Vincens, vice president of financial services at Kaplan North America.
“They sort of sweeten the pot by adding flexibility to the managing of firm element programs,” Vincens said. “They tried to create that balance.”
Finra said it worked with state securities regulators in crafting the CE proposal, which must be approved by the SEC. Last year, the North American Securities Administrators Association released a model rule that would require investment adviser representatives to complete 12 hours of continuing education annually.
“In this industry, there’s a lot more conversation around continuing education and training,” Vincens said.
As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.