Reports of cheating on the Financial Industry Regulatory Authority’s continuing education exams are increasing, according to InvestmentNews.
FINRA administers the continuing education (CE) program for the securities industry. The CE requirements consist of a Regulatory Element, that provides training on regulatory developments and rule changes relevant to each registration category. and a Firm Element, to keep individuals up to date on topics related to professional responsibility and to their role, activities or responsibilities. To become registered, securities professionals must pass qualifying exams administered by FINRA.
So far this year, there have been nearly two dozen cases reported to the authority of cheating in order to get CE credits. In one case, FINRA suspended and fined four Northwestern Mutual Investment Services representatives and a Pruco Securities rep for allowing imposters to sit in on their behalf and complete the CE required to renew their licenses.
The reps were suspended for one month and fined $5,000. They were found to be in violation of FINRA Rule 2010, which states that “member firms and their associated persons ‘shall observe high standards of commercial honor and just and equitable principles of trade’ in the conduct of their business.” The rule also “encompasses any unethical, business-related misconduct regardless of whether it involves a security.”
FINRA noted that individuals who sell various insurance products, including securities such as variable annuities, must hold an insurance license, which is subject to renewal every two years and generally require licensees to complete 15 CE credits.
“Northwestern Mutual takes matters of governance and compliance seriously, including our responsibility to regulatory bodies and our commitment to meeting continuing education requirements,” said a company spokesperson. “Upon become aware of certain information, we took immediate steps to self-report to the appropriate regulatory bodies and began a thorough investigation regarding continuing education practices. It is our expectation that all financial representatives and their teams individually meet the continuing education requirements necessary to keep their licenses and registrations current..”
Financial advisors who spoke with Investment News said the continuing education exams are an important aspect of the profession, and are part of the challenge of remaining current on the industry’s regulations and requirements, particularly for those with more than one license.
Michael Kitces, head of planning strategy at Buckingham Strategic Partners and cofounder of the XY Planning Network, noted the varying levels of content in CE programs. He said the content is seen as more legitimate when asset managers work with credible CE providers while others produce content based on their own wholesalers.
“Companies that manufacture or distribute products try to offer CE credits to advisors that really are just a veiled sales pitch,” Kitces said.
He said his company, Kitces.com, has more challenging materials for advisors than other CE providers.
“There are a lot of CE programs out there where if you already have some industry knowledge and experience, you can pass the quiz without reading the article or viewing the webinar,” he said, adding, ““We try to work with the advisors who don’t just want to check a box – they want to learn.”
Philip Petrowski, senior partner at Blackhorn Partners, reduced his number of designations from six to two, citing the expense and complexity of compiling the CE credit hours required to maintain those designations.
“It’s too confusing to the consumer. And for the advisor, it’s too difficult to keep up with the different deadlines,” he said. “There’s got to be a better way.” As for organizations that provide CE for advisors, Petrowski said, “It’s become a cash grab.”
Kitces also pointed out the challenge involved for advisors trying to maintain multiple designations.
“As advisors do pursue education, which includes professional designations… we are living in a world where you need multiple types,” he said. “The pressures around finding multiple program, multi-designation CE is increasingly becoming a pain point for advisors who leaded into education.”
The attorneys at Lewitas Hyman understand the complexities that come with being the subject of a regulatory inquiry by the SEC, FINRA, and other self-regulatory organizations, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact us at (888) 655-6002 or through our online contact form for a free consultation.
