Posted by Barb Gavitt, ITP, SILA-F ● April 15, 2019

Do Investment Adviser Representatives (IAR) need Continuing Education?

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What is an Investment Adviser Representative (IAR)?

An Investment Adviser Representative (IAR) is any partner, officer, director, or employee who works for an investment advisory firm to provide investment advice to clients for a fee. An IAR is always an individual and must be licensed in every state where they conduct business.

How does someone become an Investment Adviser Representative (IAR)?

To become registered as an investment adviser representative, a candidate must pass either the Series 65 or Series 66 (if they hold a Series 7 license). The Series 65 and 66 exams are developed by the North American Securities Administrators Association (NASAA) and the license is issued by state securities regulators who are members of NASAA. Currently, the only “education requirement” is to study the information that is necessary to pass either of these exams. That’s it. Nothing else.

Most financial services professionals, including Certified Public Accountants (CPAs), Certified Financial Analysts (CFAs), Certified Financial Planners (CFPs), and any person holding a FINRA registration, are required to complete continuing education (CE) requirements periodically. In fact, almost all financial industry professional designations and licenses require some form of CE to maintain.

NASAA’s fundamental mission is protecting consumers who purchase securities or investment advice. NASAA members are responsible for licensing firms and their representatives, investigating violations, filing enforcement actions, and educating the public about investment fraud. Yet they have not independently required ongoing training or education of those individuals directly selling advice to more than 100 million investors—until now.

NASAA’s IAR CE Initiative

NASAA surveyed its U.S. members in 2017, including state securities administrators in all 50 states and D.C., and received strong support for exploring a CE program for IARs. According to NASAA, its members indicated that an IAR CE program could improve the quality of advice given, increase professionalism, and reduce the number of compliance deficiencies discovered by regulators during annual examinations.

In addition, IAR CE will create an opportunity for IARs to stay current with industry and regulatory developments, which will provide more protection to the investing public.

In 2018, NASAA conducted an online survey of its external stakeholders to elicit views on potential CE content areas, delivery methods, program structure and requirements, and current CE obligations and participation.

2018 IAR CE Survey Responses

Of the approximately 1,200 respondents, 1,000 were registered IARs, 100 were compliance officers (not registered), and 100 were state regulator staff members. The following information was gathered:

  • 61% of the industry responses (1,100) are already subject to CE requirements due to a designation or FINRA registration
  • 75% of the industry responses indicated that IAR CE was at least somewhat important, with 50% indicating it was important or very important
  • Nearly 40 % stated that it was needed or critically needed
  • 72% of the industry responses indicated they would at least somewhat support the creation of an IAR CE program

Program Structure and Requirements

There has not been a formal program design or any requirements proposed, but it is possible that all state-registered investment adviser representatives may be required to complete a stated number of practical and regulatory hours of CE every 1-2 years.

Of the more than 340,000 IARs subject to this potential requirement, more than 80% are already required to meet some form of CE because they hold a professional designation or are registered by FINRA. Those IARs currently fulfilling other industry CE requirements would most likely be able to comply with a portion of the IAR CE.

IAR CE Implementation

Before being implemented, an IAR CE Model must be adopted by NASAA and approved in a state before becoming effective. There are currently 46 jurisdictions that have statutory authority (expressed or implied) to require IAR CE.

NASAA is still in the process of gathering input from industry professionals to determine how to create a program to efficiently and effectively achieve its goals. There are still many unanswered questions, such as:

  • Who will provide the content?
  • How will the courses be accessible?
  • How will the required hours be tracked?
  • What topics will be required?
  • What if a state wants to require state-specific regulations that are not addressed in the NASAA model rule?

While the implementation process will be ongoing, NASAA will continue to elicit input from interested parties, both internal and external, which will help them to develop the structure and requirements of the IAR CE program. According to NASAA, potential implementation is slated for 2021.

Topics: Securities, Series 65, Series 66

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