Just four years after continuing education requirements were introduced, violations of those rules are among the most common problems discovered by the NASDR. However, formal disciplinary actions on this issue are rare.
Most of the deficiencies are in the firm-element portion of the requirements, whereby firms must perform an annual needs analysis and implement training based on those needs. Examiners often note that firm-element programs "could be stronger," an NASD spokesperson says.
Formal disciplinary actions for continuing education deficiencies are typically not warranted, but such problems are among the top items cited in informal actions, such as letters of caution, the regulator says.
The NASD would not provide statistics about the extent of the deficiencies.
Firm-element requirements are a bit fuzzier than the regulatory-element rules, which require standardized computer-based training. To provide more guidance about the firm element, the Securities Industry Regulatory Council on Continuing Education, which developed the continuing education program, released a 15-page advisory document in September.
Meeting firm-specific training requirements is especially tough for smaller firms to handle, says compliance consultant Warren Forest, president of Forest Brokerage Advisors in Casselberry, Fla. NASDR examiners have been suggesting these firms polish up their in-house training programs, but Forest expects that formal enforcement actions may be around the corner. "Increasingly, [examiners are] under orders to write them up," he says.
Some critics say the continuing education requirements--and any enforcement actions that follow--are the wrong approach.
"[Continuing education regulations] were not designed as a punishment tool. They were supposed to be an educational tool," says compliance consultant Joseph Mays, president of Securities Consulting Group in New York.--Michael Hayes
