2019 Council Status Report
As Chair of the Securities Industry/Regulatory Council on Continuing Education (“Council”), I would like to continue the tradition established by my predecessors and provide you with a review of the activities and accomplishments of the Council in 2019. As described in the following sections, the Council’s primary mission continues to be implementing improvements to the Securities Industry Continuing Education Program (“Continuing Education Program”) to better serve the industry’s continuing education needs. This year was particularly exciting in that regard as the Council, working with industry regulators and the industry, has made great strides toward proposing what we believe are significant improvements to the Continuing Education Program.
In 2019, there were 17 industry members and four self-regulatory organization (SRO) members, as well as SEC, NASAA and SRO liaisons to the Council. Industry members generally serve four-year terms. The Council meets quarterly.
The Council has specific advisory and consultative responsibilities to the Continuing Education Program. These are:
I. recommending and approving new content for the Regulatory Element Program;
II. recommending updates to the Firm Element Program;
III. promoting effective implementation of meaningful continuing education to the securities industry;
IV. liaising with appropriate industry groups and regulators; and
V. maintaining the program on a revenue neutral basis subject to adequate financial reserves.
There are five standing Council committees: the Executive Committee, the Regulatory Element Committee, the Firm Element/Strategic Planning Committee, the Finance Committee and the Nominating Committee. Additional ad hoc committees are convened when necessary. In the following sections, I will share some of the Council’s 2019 accomplishments.
I. The Regulatory Element Program
Brandon O’Hara, Director of Compliance, AdvisorNet Financial, served as Chairperson of the Regulatory Element Committee for the first two months in 2019. Kelly Anderson, Corporate Compliance Principal, Allianz Life Financial Services, LLC, served as the Chairperson of the Regulatory Element Committee for the remainder of 2019. The Regulatory Element is comprised of two distinct programs:
• The S101 General Program for Registered Persons is the original Regulatory Element Program introduced in 1995 for Series 7 registered persons and all other registrations not covered by the other programs. The S101 program was updated in 2016 to include personalization in the form of self-selection by candidates for one module that reflected their business functions.
• The S201 Supervisors Program for Registered Principals and Supervisors was introduced in October 1998.
The Council’s goal is to refresh the content for each Regulatory Element Program annually with updated content that addresses rules, regulations and ethical business practices, especially those topics that are of fundamental importance to the industry or of regulatory concern. Content for these programs is developed by the Regulatory Element Content Committees, composed of industry subject matter experts, along with SEC, SRO and NASAA representatives, who meet periodically for this purpose.
II. The Firm Element
This year’s Firm Element/Strategic Planning Committee Chairperson was Gina Hyde, Chief Compliance Officer of Stifel Financial. This committee reviews issues and trends in the industry and provides guidance on tools that may be useful to the industry.
The Firm Element Advisory (FEA) is an online document that is published by the Council quarterly to highlight current regulatory and sales practice topics for possible inclusion in Firm Element training plans. Topics for the FEA are identified from a review of industry, regulatory and SRO announcements and publications of significant events. The FEA is available on the Council website.
III. Promotion of Effective Continuing Education in the Securities Industry
The Council website, www.cecouncil.com, serves as a reliable source of information and assistance to the securities industry with respect to Securities Industry Continuing Education. A variety of tools and materials are available to individuals to assist them in preparing for their Regulatory Element sessions. Additional resources are available to assist firms in developing their Firm Element training programs.
The Council website provides a launch page for participants to take their CE Online session.
IV. Liaising with Appropriate Industry Groups and Regulators
On occasion, Council members or SRO staff who support Council functions speak at industry conferences to keep industry participants apprised of the latest issues and matters with regard to the Continuing Education Program and to receive feedback on Council initiatives.
As part of our outreach, members and liaisons to the Council have spoken about the Continuing Education Program to industry representatives at the following meetings in 2019:
• Association of Registration Management’s Annual Conference (ARM);
• Licensing and Registration Council/Registration and Qualifications Subcommittee meetings (LRC);
• FINRA Annual Conference;
• National Society of Compliance Professionals (NSCP) National Conference; and
• Securities and Insurance Licensing (SILA) Annual Conference.
The Council is grateful for the SEC’s continued support over the years. Special thanks go to members of the Commission staff who have worked so closely with us. Prior to assignment changes, we worked with commission staff from the Office of Market Supervision in the Division of Trading and Markets: Katherine England, prior to her retirement, and Mia Zur attended Council and Content Committee meetings this past year. Most recently we have been connected with commission staff from the Office of Chief Counsel in the Division of Trading and Markets: Daniel Fisher and Edward Schellhorn. We look forward to working closely with Daniel and Edward in the coming year.
V. Maintaining the Continuing Education Program on a Revenue Neutral Basis
One of the responsibilities of the Council is to provide advice and consultation on maintaining the Continuing Education Program on a revenue neutral basis while ensuring adequate financial reserves to maintain and improve the programs.
The Finance Committee regularly reviews the financial health of the Continuing Education Program to ensure that it remains positioned to continue our mission. Lance Fraser, Managing Director & Head of Business Due Diligence, Bank of America served as the 2019 Finance Committee Chairperson.
VI. 2019 Enhancements Proposal
The Council continues to focus its attention on the Continuing Education Program to explore a number of opportunities to improve the efficiency and effectiveness of education in the securities industry. Over the past few years, the Council worked with FINRA and other regulatory agencies as the Regulatory Element course was moved online. This step allowed registered individuals to complete the course at their convenience at a location of their choosing instead of being confined to a testing center. Apart from greater convenience to firms and individuals, this step also allowed FINRA to reduce the per session fee and has already saved firms over $20 million.
In late 2018, the Council proposed recommended enhancements to the Continuing Education Program. These enhancement are outlined in FINRA regulatory notice 18-26. FINRA received 22 comment letters that are generally supportive of the potential enhancements identified by the Council.
This year the Council conducted various industry outreach activities to garner feedback on specific aspects of the proposed enhancements included in FINRA regulatory notice 18-26. After reviewing the public comments in response to the notice and after further discussions, on September 12, 2019, the Council published the following recommendations regarding the Continuing Education Program:
• transition to an annual Regulatory Element;
• design Regulatory Element content that is more tailored and relevant to each registration category with diverse instructional formats;
• publish the Regulatory Element learning topics for each coming year in advance;
• enhance the functionality of the FINRA systems to facilitate compliance with the Regulatory Element;
• recognize other training requirements for purposes of satisfying the Firm Element;
• improve the guidance and resources provided to firms for conducting the Firm Element annual needs analysis and for planning their respective training;
• develop a content catalog that firms may optionally use for selecting or supplementing Firm Element content; and
• consider rule changes that would enable individuals who were previously registered to maintain their qualification by participating in an annual continuing education program.
Discussions between the regulatory agencies and representatives from the industry have continued with regard to ways to continue to transform the Continuing Education Program in an efficient and effective manner, while also including ideas for enhancing the program further. With the goal of customizing the Continuing Education Program to better meet the needs of firms and registered representatives, members of the FINRA Continuing Education team, on behalf of the Council, have discussed these ideas with a range of industry professionals in numerous focus groups, one-on-one conversations and during Council meetings, resulting in some of the ideas found here. The Council’s recommendations have been strongly shaped by suggestions from the industry, and the Council believes they will modernize and greatly enhance the effectiveness of continuing education in our industry.
The Council continually seeks to raise the industry’s awareness of both the Council and its mission to promote and improve the Continuing Education Program within the securities industry. The Council continues to be grateful for the SEC’s commitment to this goal and would appreciate continuing support from you and your fellow Commissioners to raise awareness of the Council’s work and of the importance of the Continuing Education Program in general. As we move toward formally proposing changes to the Continuing Education Program, the Council asks that the SEC strongly consider the benefits these changes can bring to the industry. On behalf of the Council, thank you for your support. I would be happy to answer any questions you might have.
Chair of The Securities Industry/Regulatory Council on Continuing Education
Robert W. Baird & Co