Updated June 8, 2023 5:00 pm CDT
Investment adviser representatives (IARs) are required to complete 12 credit hours of continuing education (CE) each year. This IAR CE program was adopted by the North American Securities Administrators Association (NASAA) in 2020, and states, in turn, are in the process of adopting NASAA’s model rule.
Why are IARs now required to complete CE?
NASAA’s fundamental mission is to protect consumers who purchase securities or investment advice. Continuing education requirements help accomplish that mission by ensuring that licensed professionals remain engaged with the industry. Almost all financial industry professional designations and licenses require some form of CE to maintain.
Prior to adopting the model rule, NASAA surveyed its U.S. members, including state securities administrators in all 50 states and Washington D.C., and they received strong support for implementing 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 response, NASAA developed a Model Rule on Investment Adviser Representative Continuing Education. This model rule was released in November 2020, and compliance began with the 2022 calendar year for states that have adopted the rule.
How many credit hours of continuing education do IARs need to complete?
IARs must complete 12 CE credit hours each year. Specifically, IARs must meet the following requirements:
- 6 credits must be in IAR Regulatory and Ethics Content, with at least 3 hours covering ethics; and
- 6 credits must be in IAR Products and Practice Content
Under NASAA, a credit is designated to be at least 50 minutes of educational instruction.
These hours must be completed by taking a NASAA-approved course with an authorized provider. The course provider will report completed hours to FINRA, but it is the IAR’s responsibility to ensure the reporting occurs.
How often do IARs need to complete CE requirements?
IARs must complete continuing education requirements each reporting period. The reporting period is a 12-month period as determined by NASAA. An IAR’s initial reporting period in a state starts on the first day of the full reporting period after the individual is registered with the state. For example, the initial reporting period for an IAR who registers in November would begin January 1 of the following year.
Can IARs carry forward excess CE credit hours?
No. IARs who complete more than 12 CE credit hours may not carry those hours forward to the next reporting period.
What happens if an IAR does not complete their CE requirements?
If an IAR does not complete the CE requirement by the end of first annual reporting period, their registration will renew as CE Inactive at the close of the calendar year until they complete all the required CE credits.. They can continue to do business and their status in states participating in IAR CE will change to Approved - Pending IAR CE. The CE Inactive status is notice to the IAR that if CE is not completed by the end of the next calendar year, the IAR will be unable to renew their registration in all states that participate in the CE program.
Current registration practices will remain the same for states that have not adopted the CE model rule.
What if an IAR is already completing CE requirements with FINRA?
If an IAR is registered as an agent of a FINRA member broker-dealer and is complying with FINRA’s continuing education requirements, they will only need to fulfill a portion of the NASAA CE requirements.
Completion of FINRA Regulatory Element CE requirements will fulfill the 6-hour IAR Products and Practice requirement. The agent will still be required to complete the 6-hour IAR Regulatory and Ethics Content. Firm Element CE may count towards IAR CE, but only if the course is approved as IAR CE by the provider or the firm offering the course.
If an IAR is registering after a period of being unregistered, do they need to complete CE?
If an IAR is registering after a period of being unregistered, they must complete CE for all reporting periods that occurred between the time that they became unregistered and when they become registered again. This requirement will not apply if the IAR takes and passes the required exam, or receives an exam waiver in connection with the application for registration.
Have all states adopted CE requirements for IARs?
No. States are in the process of adopting the requirements.
The following jurisdictions implemented the model rule as written on 1/1/2022:
- Maryland
- Mississippi
- Vermont
The following jurisdictions implemented the model rule as written effective 1/1/2023:
- Arkansas
- Kentucky
- Michigan
- Oklahoma
- Oregon
- South Carolina
- Washington D.C.
- Wisconsin
The following jurisdictions implemented IAR CE requirements effective 1/1/2024
- Colorado - adopted model rule as written
- Florida - slightly modified rules with same requirements
- Tennessee - adopted model rule as written
The following jurisdictions have pending legislation to adopt the model rule as written:
- California
- Hawaii
What if an IAR is registered in multiple states?
IARs are required to meet the CE requirements of all the states they are registered in.
If an IAR’s home state has adopted the model rule, or has CE requirements that are at least as stringent as the model rule, once the IAR has completed those requirements, they will be considered compliant in the other states where they are registered.
If an IAR’s home state has not adopted the model rule, or has CE requirements that are not as stringent as the model rule, then the IAR needs to be in compliance with the requirements of at least one state that has adopted the model rule. The IAR will then be considered to be in compliance with the CE requirements of the other states.
Questions regarding state-specific requirements should be directed to that jurisdiction's securities regulator.
Conclusion
The IAR CE program ensures that IARs remain knowledgeable in industry developments and in current regulatory requirements. States are continuing to adopt NASAA’s model rule, and A.D. Banker will keep you up-to-date with any updates or changes along the way.
If you are not yet registered as an IAR, A.D. Banker can also help you start that process. To become registered as an IAR, a candidate must pass either the Series 65 exam, or the Series 66 if they hold a Series 7 license.
A.D. Banker offers a Series 65 exam prep course that will successfully prepare you to pass your licensing exam on your first attempt.
Topics: Securities, Series 65, Series 66
