Obligations to Your Firm
As a qualified securities professional, you have an obligation to your firm to supply accurate information on the proper registration forms. Under the Securities Industry Continuing Education Program, you are also obliged to continue your education throughout your career.
Your firm registers you by filing a Uniform Application for Securities Industry Registration or Transfer, Form U4, with FINRA. This Form also lists other SROs, such as the securities and options exchanges, and the states with which you are to be registered. It is important that all of the information you supply to your member firm in the preparation of the Form U4 is complete and accurate. If, during its routine review of Form U4 filings, FINRA discovers that any portion of the Form U4 information you submit, especially relating to your personal history and past disciplinary or law enforcement encounters, is misleading or omits material information, disciplinary action may be taken and you could be barred from the securities industry. Now is a good time for you to review that filing with your supervisor and supply your firm with any missing information. You have a continuing obligation to update your Form U4 promptly if any of the information changes or becomes inaccurate. This includes your home address or any of the questions involving customer complaints, criminal disclosure, regulatory disciplinary actions, civil judicial actions, terminations, or financial judgments. You promise to do this when you sign the Form U4.
If you leave your firm for any reason, the firm has up to 30 days to supply you with a copy of the Uniform Termination Notice for Securities Industry Registration, Form U5, which it files with FINRA. The Form U5 indicates the date you left the firm and a brief reason why you left. You should review this Form for accuracy. If the information supplied on the Form U5 is inaccurate or incomplete, you should notify your prior employer promptly. Also, your next FINRA member employer must obtain and review a copy of your most recent Form U5. If your prior employer does not respond satisfactorily to a written request for a copy of your Form U5, please notify FINRA.
Your firm is required to report on the Form U5 any customer complaint, criminal action, regulatory action, investigation, internal review alleging rule violations, any investigation it may currently be conducting, and the reason for any involuntary termination.
It is important for you to understand that as a registered representative, you are an agent of your member firm. Whether you are an employee or a so-called "independent contractor" (for regulatory purposes there is no distinction between the two terms), you are obligated to follow all applicable securities laws and regulations. For example, you must get clearance from your member firm for certain personal financial activities. Accordingly, you should discuss with your supervisor any financial accounts that you or members of your immediate family have with other securities firms, relationships with other businesses, and any forms of compensation you receive from any source other than your firm.
As a registered representative, your work-related documents, such as correspondence with customers, new account forms, and copies of customer statements, must be reviewed and retained by your firm in special ways according to rules applicable to securities industry participants. Regardless of the name on the incoming envelope, these documents are also the property of the firm.
If you leave your firm, you may not take these documents without the permission of the firm. In addition, you need to discuss with your supervisor the conditions under which you may communicate with customers-especially during your training period.
Industry rules require that a registered principal supervise you and that you meet with this supervisor at least annually to formally discuss regulatory and compliance matters. If you do not know who your supervisor is, find out now. Your supervisor should familiarize you with your firm's written compliance procedures and guidelines, which every firm must maintain. You are expected to know and understand them.
After your registration is effective, you may conduct a securities business as an agent only while under the direct supervision of your firm. You cannot conduct any securities transactions other than with your member firm unless you get prior written approval to do so. Before accepting an offer to work part-time or off-hours with any other business concern, discuss this relationship with your supervisor.
Even if you are registered to sell only insurance-related securities products, you must be aware of FINRA rules and comply with them. Further, as an insurance agent you must familiarize yourself with, and obey, any restrictions that your firm may have concerning selling other companies' insurance products.
As a registered representative, you are also required to adhere to certain continuing education requirements during the course of your career. On July 1, 1995, FINRA’s predecessor, the National Association of Securities Dealers (NASD), and other SROs adopted the Securities Industry Continuing Education Program (Program). The Program includes periodic computer-based training in regulatory matters (the Regulatory Element) and annual training programs provided by your firm to keep you informed on job- and product-related subjects (the Firm Element).
The Regulatory Element requires you to complete one of the Regulatory Element computer-based training programs within 120 days of your second registration anniversary date and every three years thereafter. Note that this schedule changes if you become the subject of a significant disciplinary action, which is a suspension, fine of $5,000 or more, or a statutory disqualification. If you become the subject of a significant disciplinary action or are otherwise ordered by a securities regulator, you will be required to complete a Regulatory Element computer-based training session immediately and your subsequent requirement anniversaries will be determined by the date of the significant disciplinary action and not your initial securities registration date.
The Regulatory Element focuses on compliance, regulatory, ethical and sales-practice standards. Its content is derived from rules and regulations as well as standards and practices widely accepted within the industry.
There are four different Regulatory Element programs: the S201 Supervisor Program for registered principals and supervisors; the S901 Operations Professional Program for Series 99 registered persons; the S106 Regulatory Element Program for Series 6 registered persons; and the S101 General Program for all other registrations. If you have more than one securities registration, you take only one Regulatory Element program. Your firm will advise you which Regulatory Element Program to take and when you must take it. The Regulatory Element Continuing Education session is 3½ hours long and costs $100.
Content for the S201, the S901, the S106 and the S101 is organized into four modules, as well as common topics that may be covered in any of the four modules. The format of the cases in the Programs is primarily text-based, supplemented by media treatments that provide important information, context and education related to the story. You will be able to choose the order in which to complete the four required modules. In each module, you will be led through a case that provides a story depicting situations that may be faced by registered persons in the course of their business. Each case contains significant educational content, including optional material called Resources and Glossary Rollovers. You must review the story content of each case but may choose whether or not to utilize the optional materials.
Topics identified in the S201 outline are: Supervision and Control; Handling Customer Accounts, Trade and Settlement Practices; New and Secondary Offerings and Corporate Finance; and Product Knowledge and Related Supervisory Considerations.
Topics identified in the S901 outline are: Client Confidentiality and Responsibilities of Registered Persons; Operations Workflow; and Product and Market Knowledge. You will be presented with cases from the first three modules, regardless of your job function. The fourth module consists of personalized cases subdivided into four functional areas: New Accounts; Trading and Settlement; Operations Generalist; and Treasury, Custody and Control. You will select which of the four functional categories best describe the majority of your routine work. Upon selection of a functional category, a case will be randomly selected from one of the four sub-modules. The cases in these sub-modules will focus on issues related to each specific function.
Topics identified in the S106 outline are: Communications With the Public; Suitability; Handling Customer Accounts, Trade and Settlement Practices; and Product Knowledge.
Topics identified in the S101 outline are: Communications With the Public; Suitability; Handling Customer Accounts, Trade and Settlement Practices; and New and Secondary Offering and Corporate Finance.
As part of each case, you will be presented with a series of questions related to the story and facts in the case. These questions are designed to assess your understanding of the materials presented. You must demonstrate proficiency in each of the four modules, and will be provided a maximum of two cases in each module in which to do so. If you do not demonstrate proficiency in any one module, you will not be able to complete the Regulatory Element requirement within that session. If a module is not completed, you may terminate the incomplete session or continue to review the remaining material for additional educational benefit. In either event, you will need to schedule another session in order to satisfy the Regulatory Element requirement.
All Programs are designed to provide ample time to complete the required materials within the 3½ hour timeframe allotted. If you are required to sit for the Regulatory Element in the near future, you are encouraged to review the sample case and orientation which can be found on the CE Training Resources Web page prior to sitting for your session.
Failure to Satisfy the Regulatory Element
Failure to complete the Regulatory Element within 120 days of your prescribed anniversary date will result in your registration becoming inactive. This means that you may not engage in, or be compensated for, activities requiring a securities registration until you satisfy the requirements. If your registration remains inactive for two years it will be administratively terminated and you will be required to requalify for your registration by examination.
The Proprietary Trader Continuing Education program (S501) is designed to reinforce the knowledge of rules and regulations as they pertain to the securities markets, trading and prohibited practices, investment strategies and products as applicable to the role of a Proprietary Trader. The S501 program will be comprised of two modules. The content within the Program uses Primary Learning Objectives (PLO) to deliver the educational message. The PLOs are mainly derived from rules and regulations as well as standards and practices, although the specific requirements of certain rules may differ slightly among the various SROs/Exchanges. The Proprietary Trader Continuing Education Program requires all registered individuals to complete a computer-based training program within 120 days of the second anniversary of their registration approval dates and every three years thereafter. The Proprietary Trader Continuing Education session is 2 hours long and costs $60.
Firm Element continuing education has a different but complementary focus to the Regulatory Element training. Every year, your firm will evaluate and prioritize its training needs and prepare a written training plan designed to enhance your securities knowledge, skill, and professionalism. The training programs in your firm's Firm Element plan will generally cover the general investment features and associated risk factors, suitability and sales practice considerations, and applicable regulatory requirements of the securities products, services, and strategies you offer to the public.
Failure on your part to participate in the training programs stipulated by your firm will result in sanctions imposed on you by your firm, including possible termination.
For more information on the Securities Industry Continuing Education Program, please view the information on www.cecouncil.com or contact:
9509 Key West Avenue
Rockville, MD 20850
Phone: (301) 590-6500