Enhancing Knowledge and Compliance: The Model Rule on Investment Adviser Representative Continuing Education

In the ever-evolving world of investment advising, staying knowledgeable and up to date is crucial for professionals. Recognizing this, the North American Securities Administrators Association (NASAA) introduced the Model Rule on Investment Adviser Representative (IAR) continuing education in late 2019. The goal of this rule is to enhance the knowledge and ongoing learning of IARs while promoting regulatory compliance. 

The Model Rule, designated as either 2002-411(h) or 1956-204(b)(6)-CE depending on the Uniform Securities Act version, was adopted by NASAA on November 24, 2020. It applies to IARs registered with both state- and SEC-registered investment advisers, making it a comprehensive requirement within the industry.

The Model Rule mandates that IARs complete continuing education courses, which include topics covered by organizations such as FINRA, the Certified Financial Planner Board of Standards, or the CFA Institute. There are two main components of the rule: Ethics and Professional Responsibility, and Products and Practice.

The Rule provides flexibility for IARs to choose courses that align with their interests and business models. If the course provider meets the credit requirements and the content is approved, IARs have the freedom to select courses that best suit their professional needs. It is important to note that the courses must be offered by an Authorized Provider, and completion of courses must be reported annually. While there are no blanket exceptions, the Model Rule does consider related continuing education courses completed by IARs to satisfy the requirements. 

Non-compliance with the Model Rule can have consequences for IARs. Those who fail to meet the continuing education requirements by the end of the calendar year will be labeled as "CE Inactive" in CRD (Central Registration Depository) and may be required to pay an annual renewal fee. 

Included with this article is a template letter which can be used to communicate the new IAR CE requirements with your IARs. See ‘Completing Your IAR Continuing Education.

This information comes from Janice Powell, Chief Compliance Officer at DFPG Investments, LLC and Craig Watanabe, Director IA Compliance at DFPG Investments, LLC whose article Complying with New IAR Continuing Education Requirements appeared in the June 2023 editions of NSCP Currents. To receive important information such as this and to review the risks and the associated compliance and supervision suggestions, join NSCP today to receive NSCP Currents and stay up to date on issues such as this that matter most for the financial services industry. Members can access the full article here.

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