Posted by: Dan Butterfield, Solutions Engineer at SmartPros
Published: October 15, 2018
Nothing is certain but change! Securities Industry Continuing Education (CE) programs may soon undergo significant changes if new proposals are adopted. The new ideas are now in the “testing the waters” stage and have been floated out to firms at the 2018 FINRA Conference and via new FINRA press-release and Reg. Notice. “What does this mean to me?” you ask. If you’re involved in CE program oversight, compliance, or simply a “covered person” required to complete CE, you should to read on and learn more. Change can be disruptive but may also come with some benefits for you and your firm.
Firm Element CE (FE) is training delivered to the firm’s “covered persons” (primarily those who meet with the investing public or their direct supervisors). Firm element courses/content—“in house” or via third-party education providers—are determined after conducting a "needs analysis" that is specific to each firm and addresses the nature of business conducted and any pertinent issues affecting the firm or its registrants. The FE needs analysis must also consider the results of its registrants’ recent Reg Element CE completions (i.e., where were they deficient?). Once the needs analysis is done, a firm "training plan" is created. FE is done annually and firms must document, and be prepared to defend, their FE training program.
Regulatory Element CE (Reg Element) is prescriptive training (i.e., determined by FINRA and NOT by the frim) and is based upon individuals’ registration type (e.g., different content for Supervisors vs RRs):
Reg Element training cycles (registrant’s exam window opens) begin at the second-year anniversary from initial registration and every three years thereafter. Reg Element is delivered online via FINRA’s Online CE System, and curriculum generally consists of important rules and regs, compliance, ethical and supervisory subjects, and sales practice standards. Reg Element must also be completed within prescribed time-frames.
In concert with the self-regulatory organizations (SROs*), the rules for continuing education were developed by The Securities Industry/Regulatory Council on Continuing Education—or more simply the “CE Council” (CEC)—and approved by the Securities and Exchange Commission (SEC) on February 8, 1995. Firm Element and Regulatory Element (Reg Element) went into effect in July of 1995. Several key Reg Element rule changes were implemented over the years, yet Firm Element (FE) has remained largely untouched.
In 2015, with approval of amendments to FINRA Rule 1250 (Continuing Education Requirements), the “new era” for CE began. Specifically, the CE Online Program was rolled out. As a result, online Reg Element CE fees were reduced to $55 per participant, compared to the physical (onsite) test center delivery charge of $100. Another important change was the elimination of “In-Firm Delivery” of the Reg Element. In-Firm Delivery (via supervised sites set up at firms) was phased out effective January 4, 2016. All Reg Element Programs are now available and must be completed through FINRA's CE Online System.FINRA’s new system allows participants to “satisfy their CE Regulatory Element requirement from a home or office computer—anytime, anywhere.”
If implemented, the new (Sept 2018) FINRA/CEC proposals will have wide impact on firms and their “covered persons”—those who must participate in both Reg Element and Firm Element CE. The new proposals are outlined in FINRA’s Sept 6, 2018, News Release and in more detail through FINRA’s Sept 8 Reg Notice 18-26.
What are the primary “CE Program” changes under consideration? FINRA and CEC are now soliciting feedback from member firms around the notion that Firm Element (FE) can more effectively be provided through a single platform, where content standards are more uniform, redundancies can be minimized, and delivery methodology can be more efficiently tracked and maintained. Specifically, FINRA/CEC are suggesting that all FE content should be delivered via FINRA's Online CE System and supported via email notifications through the Financial Professional Gateway (FINPRO). If these changes are implemented, this would remove both ‘in house’ (member firms) and third-party CE vendors from the CE delivery and in some instances 'tracking' business, albeit FINRA is making it clear that they will continue to 'consider' (presumably there will be a vetting process) and utilize course content from firms and education providers, as long has the content can be formatted for delivery through FINRA’s system. Moreover, FINRA has proposed one (1) course catalogue where all member firms can choose content which meets/matches their training plan along with FINRA’s new “to be defined” minimum standards; “FINRA and the CE Council would work together with third-party training providers to offer a large catalog of readily available materials that are centrally located for convenience.”
FINRA and CEC are also touting the Financial Professional Gateway (FINPRO) e-notification and reporting capability; “The FINRA CE delivery platform provides the most efficient and effective means of tracking their compliance with the proposed CE requirements.”
While most of the bullet points above pertain to FE, there is one new notion affecting Reg Element. SICE/FINRA are proposing a move to annual Reg Element CE training versus the current 3-year cycle, and this makes elimination of redundant FE content all the more important from FINRA’s perspective, and no doubt an idea that firms and covered persons will also appreciate.
New regulations are rarely instantaneous and CE rule changes will be no exception. The CE Council is presently gathering additional info on current firm practices and needs. FINRA and the CEC are also soliciting feedback (comment period expires Nov. 8, 218) and will continue to formulate their ideas before delivery of a formal rule proposal. Given that late time of year (Oct. 2018 as of this article’s publication date) it is unlikely any formal rule will be drafted before year-end. It is more probable that CEC and FINRA will have a new proposal coming in the first or second quarter of 2019 followed by a comment period. Bottomline -- new CE rules will likely NOT be finalized until 2020 or 2021. Yet as the saying goes, "time flies."
*In May 1993, six SROs—the New York Stock Exchange, American Stock Exchange, Chicago Board Options Exchange, Municipal Securities Rulemaking Board, NASD, and Philadelphia Stock Exchange—created the Securities Industry Task Force on Continuing Education to study the issue of continuing education and to develop recommendations.
After identifying nine series exams with common content (6, 7, 22, 57, 79, 82, 86/87, 99), FINRA has decided to restructure their licensing process next year. The common content will be tested in the new Securities Industry Essentials (SIE) exam. Download this free guide to learn more about how the new securities licensing process will work, the rationale for the change, proposed SIE exam content, and how it could change hiring and recruiting practices.