View All ArticlesInvestment Adviser Representatives May Be Subject to CE Requirements
June 30, 2021
By Jessica Morgan and Jarrell Hunt - Tonkon Torp LLP
The North American Securities Administrators Association (NASAA) released its Investment Adviser Section Annual Report (Report) in April 2021, highlighting 2020 section activities. The Report focuses largely on two topics: (1) the Investment Adviser Representative Continuing Education Model Rule (Model CE Rule) and (2) the Investment Adviser Policies and Procedures Model Rule and accompanying Compliance Grid (Policies and Procedures Model Rule). This Tonkon Tip focuses on the Model CE Rule.
The Report speaks to developments since NASAA’s announcement on November 30, 2020, that its membership had approved the Model CE Rule to “set parameters by which NASAA members could implement continuing education programs for investment adviser representatives (IARs) in their jurisdictions.” The intent is that all jurisdictions will adopt the Model CE Rule and subject all investment adviser representatives (IARs) registered in their respective jurisdictions to these or substantially similar continuing education requirements. The mandatory continuing education program is intended to apply to all registered IARs of both state-registered and federal covered investment advisers. If adopted, IARs would be required to meet the continuing education requirements of any state in which the IAR is registered.
Under the Model CE Rule:
- An IAR must complete 12 hours of continuing education every calendar year, including (A) six credits of IAR Regulatory and Ethics Content (with at least three of such hours covering the topic of ethics), and (B) six credits of IAR Products and Practice Content.
- An IAR who is also a registered agent of a FINRA member broker-dealer and who complies with FINRA’s continuing education requirements may, under certain circumstances, be considered to be in compliance with (B).
- An IAR who holds a credential that qualifies for an examination waiver under Rule USA 2002 412(e)-1(d) may, under certain circumstances, comply with (A) and (B).
- An IAR who is also a registered agent of a FINRA member broker-dealer and who complies with FINRA’s continuing education requirements may, under certain circumstances, be considered to be in compliance with (B).
- Failure to comply with the Model CE Rule will result in a “CE Inactive” status. If not remedied, this status can cause the IAR to become ineligible for investment adviser registration or renewal of registration.
- An IAR registered in multiple states may satisfy the continuing education requirements of all states by complying with the continuing education requirements in the IAR’s home state, if the IAR’s home state has continuing education requirements that are at least as stringent as those in the Model CE Rule.
- If an IAR who is registered becomes unregistered, and subsequently wishes to register again, the IAR generally must either (A) complete continuing education for all reporting periods that occurred while the IAR was unregistered or (B) take and pass an examination or receive an examination waiver in connection with the subsequent application for registration.
For more information, please check out the NASAA published FAQs addressing these new requirements. Keep an eye out for our next Tonkon Tip on the Policies and Procedures Model Rule.
This client alert is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have any questions regarding this update, or for more information about this topic, please contact any of the attorneys in our Financial Services & Investment Management Practice Group, or the attorney with whom you normally consult.
About Tonkon Torp
Tonkon Torp LLP is a leading business and litigation law firm serving public companies, substantial private enterprises, entrepreneurial businesses, and individuals throughout the Northwest. For more information, visit tonkon.com.