FINRA Rule 1250 requires registered persons to participate in Continuing Education (“CE”). The term “Continuing Education” should be familiar to all registered representatives; however, the distinction between “Regulatory Element” and “Firm Element” training is often blurred. An easy way to differentiate is to remember the word “Regulatory” refers to FINRA (regulations), while the word “Firm” refers to the company you work for.
Regulatory Element
FINRA’s Regulatory Element Continuing Education program is intended to help keep registered representatives updated on compliance, regulations, ethics and sales practice standards. In 2015, Rule 1250 was amended and administration of this requirement is no longer conducted at a test center, but rather through Web-based delivery called CE Online. This provides registered persons much more flexibility in completing their requirement as it can be accessed 24/7, from any location of their choosing, including their personal residence.
A newly registered representative must complete their first online Regulatory Element session two years after passing their first FINRA exam, and every three years thereafter. Firms are notified by email from FINRA as to when a representative’s Regulatory Element CE Window will open and close. Failure to complete the session within the required 120-day window will cause a representative to become temporarily “CE Inactive”. A CE Inactive representative is not allowed to perform any registered activities or receive any securities based compensation until they complete their CE session and FINRA acknowledges completion. Upon completion of the required session, the current $55.00 fee for the session is deducted from the firm’s WebCRD account.
The Regulatory Element program has four session outlines. The most common is the S101, which is designed for representatives who hold the Series 7, Series 79 and several other securities licenses. The S106 and S901 are tailored to representatives who hold only a Series 6 or Series 99 respectively. Finally, the S201 is a requirement for supervisors and principals. The required outline is automatically assigned.
Sessions are divided into modules, which review various job responsibilities. The S101 contains four modules. The first three modules explore responsibilities to customers, operations and regulations. The last module is geared toward the representative’s job function such as sales, trading, operations or banking. The S106 contains five modules with a similar format to the S101. The S901 contains four modules covering material relevant to Series 99 representatives who do not hold additional registrations. The S201 also contains four modules with material relevant to supervisory functions. A representative is automatically assigned access to the module they are required to complete.
Representatives are allowed to access their Regulatory Element CE sessions online at any time during their Regulatory Element CE Window, and the system allows them to stop and start back up where they left off, if necessary. Formal studying for the Regulatory Element is not necessary since it is intended to be a training and review course. Representatives who experience difficulty with the material will have the opportunity to retake the modules until they demonstrate proficiency. There is no danger of failing the course or needing to pay additional fees as long as the course is satisfactorily completed within the 120-day window.
Firm Element
Firm Element Continuing Education is a Broker-Dealer designed annual training program intended to keep representatives and other covered persons up to date on relevant job and product topics. FINRA does not dictate which topics a firm needs to include in this training program, but they do provide areas of focus for firms to take into consideration as they create their plans.
Firms are required to conduct an annual Needs Analysis to help identify training needs to help keep covered employees current regarding their job and product-related topics. A written Training Plan outlining the firm’s training objectives, program, and other relevant details is also required.
Firm Element training must be completed by each calendar year-end by all client-facing representatives, and may also be completed by employees outside of that scope, if deemed necessary. Firms may choose multiple topics tailored to each individual’s own particular needs. Records of completion must be maintained by the firm for 3 years.
Tangentially related, firms are also required to conduct an Annual Compliance Meeting (“ACM”) at which all representatives must be present (either in person or remotely), and evidence of attendance must be retained. The ACM should be a review for representatives to ensure that they are maintaining compliance with a variety of topics relevant to the firm’s business and the industry in general.
Creating a Firm Element training program can be a time consuming task, so in order to make this process smoother, many firms enlist the assistance of an outside company for their Needs Analysis, as well as for their Training Plan creation, execution and tracking.
If you have questions regarding Continuing Education, please contact your NCS Regulatory Compliance Consultant or one of the compliance specialists at NCS Regulatory Compliance at 800-800-3204.
http://www.ncsregcomp.com/team/lisa-sinnott/