Your registered investment adviser (RIA) compliance program requires rigorous attention to detail, ongoing evolution, and strict adherence to regulatory standards. And for compliance professionals, that’s all in a day’s work.
What about the compliance requirements that impact the firm’s individual Investment Adviser Representatives (IAR)? With the vast majority of their time focused on your clients, compliance might not make the daily (or even weekly) to-do list for an IAR.
Unfortunately, this can have a significant impact, especially when you’re talking about IAR Continuing Education (CE) requirements.
Fact: Failure to comply with IAR CE requirements can result in a termination of an IAR’s registration and, for your firm, loss of business.
But what exactly is required and how can you help your IARs stay on top of their IAR CE compliance obligations?
From what the NASAA IAR CE Model Rule entails to who must comply, we’ve got the answers to your top IAR CE questions.
What is the NASAA IAR CE Model Rule?
In November 2020, the North American Securities Administrators Association (NASAA) introduced a rule that allowed states and recognized jurisdictions to implement continuing education requirements, the first of which began rolling out back in 2022.
“The model rule represents the culmination of years of work by state securities regulators and industry to develop a relevant and responsive continuing education program. This successful collaboration will help promote heightened regulatory compliance while also helping investment adviser representatives better serve their clients by remaining knowledgeable of current regulatory requirements and best practices.”
Who must comply with IAR CE requirements?
According to NASAA, the following states have or plan to adopt IAR CE requirements:
- Arkansas (effective in 2023)
- California (effective in 2024)
- Colorado (effective in 2024)
- Florida (effective in 2024)
- Hawaii (effective in 2024)
- Kentucky (effective in 2023)
- Maryland (effective in 2022)
- Michigan (effective in 2023)
- Mississippi (effective in 2022)
- Nebraska (effective in 2025)
- Nevada (effective in 2024)
- New Jersey (effective in 2025)
- North Dakota (effective in 2024)
- Oklahoma (effective in 2023)
- Oregon (effective in 2023)
- Rhode Island (effective in 2025)
- South Carolina (effective in 2023)
- Tennessee (effective in 2024)
- Vermont (effective in 2022)
- Washington, D.C. (effective in 2023)
- Wisconsin (effective in 2023)
- U.S. Virgin Islands (effective in 2025)
Importantly, even IARs of SEC-registered RIAs need to be aware of IAR CE requirements because individual IARs are regulated at the state level, rather than the federal level. And thus state-by-state IAR CE requirements will apply even to IARs of federally covered advisory firms.
Moreover, it should be noted that additionally states will likely adopt the IAR CE rule in coming years.
What are the IAR CE requirements?
Per the IAR CE requirements, IARs will need to complete a total of 12 hours of CE annually, comprised of:
- Six credits in ethics and professional responsibility.
- Six credits in products and practice.
Each state may have its own specific CE requirements, so it’s essential for IARs to review each applicable state’s regulations to ensure they are meeting all of the necessary requirements. Some states may require additional IAR CE hours or specific courses that may not be required in other states.
Note: The course vendors are responsible for reporting and submitting credit hours earned to the Financial Industry Regulatory Authority (FINRA), NASAA’s vendor for program tracking. However, individual IARs can monitor their progress through FINRA’s FinPro system.
How do investment advisers meet the IAR CE requirements?
So, how do you meet the IAR CE requirements? Fortunately, IARs have multiple options, including:
- Attending in-person or online CE courses offered by approved providers.
- Completing self-study courses or webinars.
- Participating in industry conferences or seminars.
IAR CE courses must be taken from approved providers, like COMPLY, and IARs should verify the courses they take meet the requirements of their state.
What happens if an IAR exceeds the credit requirement?
Advisers are free to exceed the 12 credits per year requirement, but additional credits will not “rollover” or count toward the next year’s requirement.
What happens if an IAR does not meet the credit requirement?
Failing to meet the IAR CE requirements results in:
- Year 1: Registration status becomes “CE Inactive.”
- Year 2: Loss of license “Fail to Renew.”
Loss of license/registration would be particularly damaging not only for the individual IAR, but also the RIA firm to which they belong. IARs should take their IAR CE requirements seriously and ensure that they are meeting all of the necessary requirements.
On the plus side, however, it should be noted that NASAA does allow advisers to make up missed credits in the year following (i.e., if you’re a credit short for 2024, you can make up that credit in 2025). Note that any “missed” credits will need to be fulfilled before you can start working toward the next year’s credits.
Does COMPLY offer IAR CE courses?
The short answer: yes.
The long answer: As an authorized provider of IAR CE courses, COMPLY enables firms to easily navigate this annual regulatory hurdle. From small one-person shops to multi-state firms, the COMPLY solution provides at-a-glance tracking of your IARs completed coursework, so you never have to worry about the consequences of falling behind.
COMPLY’s IAR CE courses are created by former regulators, compliance consultants, and cybersecurity experts…and with hours of available – and on-demand – content, your IARs and your firm are set up for success.
When it comes to compliance, school is always in session. Ready to see how we can help you streamline your IAR CE compliance requirements? Let’s talk.