The Financial Industry Regulatory Authority changed some of its rules on continuing education in order to help registrants who have stepped away from the industry retain their qualification for up to five years.
The regulatory notice released late last week detailed the amendments to Rules 1210 and 1240, stating they would accommodate registrants, “particularly women and underrepresented minorities, whose personal circumstances take them away from the industry for a time.” The rule changes also would demand that registrants complete CE requirmements on regulation annually for each representative or principal registration category they hold. Before this, a registrant could go two years without having to retake a qualification exam.
But while the amount of mandated CE has increased, registrants who are let go from or leave employment can retain their industry qualifications for up to five years provided they keep up with completing the annual CE requirements. This new approach is part of FINRA's new Maintaining Qualifications Program, according to the regulatory notice.
In September, the Securities and Exchange Commission approved the changes. In an approval order, the SEC said FINRA believed the amendment and new program would incentivize individuals to keep up with CE requirements even if they lost their job, keep options open for individuals who had to leave the industry for life events or necessary absences (like raising a young child or caring for an ill family member) and protect investors by ensuring that registrants who were out of the industry for an extended period still kept up with CE essentials.
Additionally, FINRA argued to the SEC that the new rule would “enhance diversity and inclusion in the securities industry by attracting and retaining a broader and diverse group of professionals.”
FINRA also claimed the change to an annual CE requirement would push registrants to remain up-to-date on regulatory changes, including the newest developments from a given previous year, and ensure registrants would get “more frequent assessments” on current issues.
“According to FINRA, this enhanced timeliness and relevance of the Regulatory Element would reduce firms’ regulatory risk as well as enhancing compliance and reducing compliance-related costs,” the SEC approval read.
Sander Ressler, a managing director of Essential Edge Compliance Outsourcing Services, said the rule change could benefit registrants because of the increased amount of “tangential businesses” servicing the broker/dealer industry, with many registrants moving back and forth between those two spaces.
“Where it’s appropriate, I think it’s great because then I don’t have to requalify for exams,” Ressler said. “Because if I take another job for two or three years, the barrier of entry for me to get my licenses back is much easier. So I think, because the industry is expanding so much in tech and marketing and so forth, and people go back and forth, this is a good thing.”
Broadly, Ressler has long worried the qualification exams may not be sufficiently indicative of registrants’ understanding of compliance requirements, so while he believed the rule changes indicated a step in the right direction, he still believed the barriers for entry in the business fell too short.
The annual CE requirements for brokers working in the industry will not go into effect until Jan. 1, 2023, but according to FINRA, the MQP will become effective for eligible individuals starting on March 15, 2022.