It used to be that the NASD’s continuing education requirements covering regulatory issues were for reps that had recently gotten their Series 7 licenses. But, effective this month, the NASD is sending everyone back to the classroom for training, no matter how long you’ve been doing business.
In a notice to members in March, the NASD announced that it was eliminating all exemptions to Rule 1120, which was established in 1995 and specified continuing education requirements reps must meet upon registering with the NASD. The Association’s portion was “meant to ensure all registered reps were up to date on regulatory, compliance and sales practice matters in the industry,” said the notice.
Until now, however, veteran brokers with at least 10 years in the business and no significant disciplinary actions as of July 1, 1998 could be exempted. These “grandfathered” persons would be allowed to skip the three-hour computer-based training.
Not anymore. Effective April 4, all registered reps are required to complete the regulatory sections of the NASD’s continuing education curriculum. According to the Securities Industry/Regulatory Council on Continuing Education, there are currently 109,000 exempted reps that will now have to take the test.
One of those “grandfathered” persons, a Morgan broker, says it’s just another example of the kind of the heightened regulatory oversight reps are facing. “I’ve had a clean record since I started more than 20 years ago, but if that no longer exempts me I just hope the testing doesn’t drag on all day,” he says.
In fact, firms will be able to administer the exam in-house. Reps must sit for the training within 120 days from the second anniversary of their registration date, and every three years thereafter. Reps who miss the training will have their licenses inactivated and will be unable to do business.
As for why the NASD proposed the changes, the notice to members doesn’t reveal much, other than that it’s responding to a December 2003 recommendation by the Securities Industry/Regulatory Council on Continuing Education to repeal all exemptions. (The Council is made up of 19 individuals, six representing self-regulatory organizations, and 13 representing the industry). The SEC approved the proposed changes in September 2004.
Aegis Frumento, a securities attorney with New York firm Duane Morris says it will alleviate the administrative hassle for firms of keeping track of exemptions. And while it may annoy older reps, that’s a small price to pay. “In the interests of maintaining quality control, a rep being exempt from this training just because they were registered in the Stone Age isn’t a good idea right now in this industry for anyone.”
